Do you want to know the legal requirements you need to start a hedge fund business? If YES, here is a checklist of hedge fund licenses, permits & insurance.
Having provided you with a:
- Hedge Fund Industry Overview
- Market Research and Feasibility
- Hedge Fund Business Plan
- Hedge Fund Marketing Plan
- Hedge Fund Name ideas
- Hedge Fund Licenses and Permits
- Cost of Starting a Hedge Fund
- Hedge Fund Marketing ideas
We will consider what it takes to get operating license and permit for your hedge fund business including insurance coverage and intellectual property protection.
Starting a Hedge Fund – Licenses, Permits & Insurance
- Best legal entity to use for a Hedge Fund
Hedge fund firm is indeed a serious business, so the legal entity you choose will go a long way to determine how big you want the business to grow. No doubt choosing a legal entity for a business such as hedge fund can be a bit challenging.
When it comes to choosing a legal entity for your hedge fund firm, you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or an “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build your hedge fund firm on.
These are some of the factors you should consider before choosing a legal entity for your hedge fund firm; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and tax issues.
If you take your time to critically study the various legal entities to use for your hedge fund firm, then you will agree that limited liability company; an LLC is most suitable. You can start your hedge fund firm as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your consulting business, so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Do You Need Professional Certification to Run a Hedge Fund?
The nature of hedge fund investment requires the services of core investment professionals. As a matter of fact, before any investor can commit their hard earned money under you’re the care of a hedge fund manager; they usually would want to know the profile of the hedge fund manager. Here are some of the certifications that you would need to acquire if you want to operate a hedge fund firm;
- Certified Hedge Fund Processional (CHP)
- The Certified Hedge Fund Compliance Expert (CHFCE)
List of Legal Documents You Need to Run a Hedge Fund Business
You couldn’t start your hedge fund business, without first properly documenting it. In doing this, you will need to have some legal documents. These are some of the basic legal document that you are expected to have in place if you want to start a hedge fund firm in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
The Best Insurance Needed for a Hedge Fund Company
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance that is required by the industry you want to operate from. Besides, the nature of hedge fund industry requires that you have the proper insurance cover in place or else you will be forced out of business if investment goes wrong.
So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your hedge fund firm. Here are some of the basic insurance covers that you should consider purchasing if you want to start your own hedge fund firm in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Getting Intellectual Property Protection for your Hedge Fund
There is no point going through the stress of securing an intellectual property protection for your hedge fund company because of the nature of the business. The only reason why you might go all the way to secure an intellectual property protection for your hedge fund firm , may be when you are involve in training and consulting and you have your own training modules.
Aside from that, you can operate your hedge fund firm successfully without any issue arising due to someone stealing your intellectual property et al.