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Hedge Fund/ Investment Partnership Group

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Private Equity Fund Start-up Checklist

General Procedures
Develop a business plan clearly outlining the goals, investment strategies and operating procedures including a basic term sheet discussing the fund's fee structure, liquidity, and valuation issues.

Select external consultants - attorney, independent accountant, custodian and technology support
Determine if reporting and accounting functions should be performed internally or externally (will have an impact on personnel requirements and fund performance)
Consider members of management team (Chief Financial Officer, fundraiser, analysts) and employment contracts Accounting Services
Find a location for business (consider tax effects) and determine equipment and technology needs
Select a name for the operating entities (general partner/managing member/investment manager) and the fund.
Are you planning on branding your products?
If so, consider trademarking the names.
Obtain adequate business, life and health insurance
Set up business bank account
Create business materials - logo, business card, stationery and marketing materials.
Keep in mind that the SEC has rules and interpretations discussing what can be used in marketing materials and the presentation of the same (discuss all marketing materials with an attorney)
Structure compensation / profit sharing for owners and others (401K); consider fee deferral issues with respect to offshore funds
Consider disaster recovery needs

Checklists

Legal Procedures (Consult with Attorney)

Decide upon the following (considering tax impact of choices):
- Legal entity (LP, LLC)
- Structure (onshore, offshore, parallel vehicles) Note that the fund's strategy may dictate structure.
- Year-end date (generally 12/31)
Related entities (advisor, general partner, managing member) of fund
Prepare legal documents
Private Placement Memorandum ("PPM" should be prepared before solicitation to outsiders)
Limited Partnership Agreement / Articles of Association / Operating Agreement
Subscription Agreement / Partnership Questionnaire
Be aware of "blue sky" laws which require certain filings when sales of the fund's interests are sold
Determine provisions to be included in partnership documents (prepared by attorneys):
Capital commitments (and stringent consequences for defaulting on a commitment), contributions, distributions, withdrawals (including any lock-ups), and transfers
Allocation of profits and losses - economic allocations, tax allocations, incentive allocation or fee, loss carry-forwards, hurdles / preferred returns and claw-back clauses (escrow or guaranty provisions)
Valuation of investments
Management fees
File organization papers and register to do business with appropriate jurisdiction
Be aware of the different regulatory authorities (SEC, IRS, ERISA) and their pronouncements and establish procedures to ensure compliance with filings and registration requirements
Create general partner / managing member and management company entities and documents
Assure compliance with solicitation rules: Accounting, Auditing, and Tax Procedures
File for Federal Tax Identification Number (SS-4)
Identify daily, monthly, quarterly and annual bookkeeping, financial and investor reporting needs
Determine annual audit and year-end tax reporting requirements (consider any registration capacities which may impose timing deadlines on audit filings)