Private Equity Fund Formation: Choice of Entity, SEC Regulatory Issues, Tax Concerns

This CLE course will examine the critical steps in the formation and operation of a private equity fund and identify the most significant private equity fund formation trends from a capital raising, SEC regulatory, and tax standpoint.

Private fund formation in the U.S. begins with a choice of entity (typically a limited partnership) and a decision about where to form the fund (usually Delaware or the Cayman Islands, but increasingly Luxembourg and other jurisdictions). Counsel's work representing a fund begins with a thorough understanding of the commercial objectives of the sponsor and the limited partners, the fundamental rights and obligations of the general and limited partners, and how to tailor the agreements between the parties.

Fund formation also requires an understanding of the regulatory landscape. The SEC has the authority to regulate investment advisers under the Advisers Act and generally requires advisers to register with the SEC unless they meet specific exemptions. Investment advisers may also be subject to regulatory requirements at the state level. The SEC continues to scrutinize fees and expenses, co-investments, conflicts of interest, cybersecurity, and other issues with investment funds.

Tax matters play a critical role in both fund formation and the structure of underlying fund investments. Sponsors of private equity funds may choose to limit participation by certain types of investors due to applicable legal and regulatory considerations and the fund's investment strategy.

Listen as our panel of private equity attorneys discusses the changing landscape of private equity fund formation, including new regulations and their implications for fund sponsors.