How to Structure Investment Management Company?

[mobrien]

What is the name of your state (only U.S. law)? Washington

I'm interested in starting an investment management business, and I'm having a hard time figuring out exactly how the business should be structured to accomplish my goals. I'd like to avoid using hedge fund exemptions, if at all possible.

My plan is this: once a client places funds under management, he is charged a small yearly asset management fee. This fee is only to cover the operating expenses of the business. Once the client withdraws money from his account, the client is charged 20% of any gains that have been made in the investments above 6% per year. Thus, the client is not charged a performance fee on a year-over-year basis. The performance fee, with hurdle rate, only is charged once the client's gains are realized when the client withdraws funds from the account. The underlying idea here is that I only make a performance fee when the client actually has the profit from his investment in hand, which helps avoid certain conflicts of interest regarding yearly performance fees being too short-term.

Can the company be structured as a partnership that issues shares in order to avoid being set up as a hedge fund? I know that Warren Buffett structured his company initially as a partnership in this way, but I'm not sure if he was relying on the hedge fund exemptions.

Thanks!
Michael

[JETX]

Originally Posted by mobrien

I'm interested in starting an investment management business, and I'm having a hard time figuring out exactly how the business should be structured to accomplish my goals.

You are asking for legal SERVICES... which is beyond the scope of this online free legal ADVICE site.

You need to talk with a local attorney who can have a conversation with you to discuss the options in your complex situation.
You might also consider contacting the SBA.