hello all, i am currently trading my own money and am growing well but i have been advised by an acquaintance that i am better off doing my stuff within an LLC; so that there is a chance of attracting more money and growing faster; because then i can have an audited track record. I kept that though on the backburner until now when i just read a couple of threads on starting hedge funds here on ET. Whats the difference between starting an entity as a LLC vs a (incubator) hedge fund. Same thing? From what i can tell starting a LLC is pretty cheap; a couple hundred dollars; but starting hedge fund seems like its going to run in around $10000 (minimum). Given that i am leaning towards an LLC; what do i loose? Doesnt probably matter but i trade mostly futures and options on futures; some ETFs too. -gariki
The only difference is when you are ready to bring external investors, you can fold you "incubator" into a full hedge fund structure. You will have continuous track record presenting your "incubator" and later full-fledged fund as a single entity. If you start with an LLC you will have to set up a hedge fund sparately and when you start the fund you will have 1-2 years of LLC track record but no track record on the actual fund. Normally you can accept external investors into an incubator but you won't have a mechnism for charging then any fees. Unless you are leaning towards prop firm structure where there is a small number of investors and you don't expect to accept new investors, larger investors will stronly lean towards a "fund" structure. In a typical LLC paperwork there would be nothing that stops you from spending the whole LLC capital on a luxury car. In the fund structure you will only be able to trade permitted financial instruments and all operation expenses (such as leasing an office or paying fees to auditors) will come out of the fees charged to the fund.