You need two things: a) a hedge fund vehicle b) an investment management company which manages the hedge fund the fees of the hedge fund vehicle is paid by the investors (limited partners), and usually account to 50k p.a. + a % of the AUM. This limits your ability to run a fund if you have less than 20m$ initial money as the cost will reduce your performance. the investment management company needs to be regulated wherever you're based, if in the US, it means SEC / CFTC depending on whether you trade securities and/or derivatives. You will have an ongoing compliance cost as you need to meet the regulators' requirements, so count a good 50k a year just in compliance salary, OR 30-40% of your time. regulators and clients will also look for a strong management team... today a hedge fund minimum annual expense is around 1m$, making it almost impossible to start with less than 100m$ as nobody charges 2/20 these days.
Acknowledging the ultimate loses, returning whatever is left over to the investors and closing the fund.
Very optimistic view, here, IMO. I was thinking "legal + compliance costs" certainly into 6 figures, realistically.