Starting your own fund management business is easy. In just two months after leaving your investment bank you can be out raising and managing your own EIS Investment Fund.

Here’s how.

Coroporate and Tax Structure

You form your management company. We usually recommend that a limited liability partnership (LLP) is the best vehicle. It offers limited liability as regards trading and is tax transparent so the profits you earn flow through to your own pocket. It is also a great structure for establishing a flexible management hierarchy where your whole team can be motivated with an investment in the business so that they are rewarded if the business makes money, typically an LLP Agreement will provide that

➢ Every one in the team earns a monthly salary which is paid for out of initial capital and then profits, referred to as Pool A;

➢ 80% of the profits after paying Pool A are then shared amongst team members according to a points allocation determined by you according to seniority and performance, this is Pool B – points can be increased or decreased with no adverse tax consequences;

➢ 20% of the profits are shared amongst you and other founding or senior partners, this is Pool C.

Profits on a sale of the fund management business and carried interest entitlements from the funds you manage are shared on a similar basis between members holding points in Pool B and Pool C but, typically, subject to vesting provisions. Pool C holds all the votes giving you and other Pool C members control of the business.

The LLP Agreement will also set out the regulatory capital which needs to be held to comply with FCA prudential requirements. This is only £5,000 if you don’t intend to hold client money. And initially you won’t want to as you will be spending your time raising your first fund, recruiting competent staff and securing a great deal flow of prospective investments.

Regulatory Structure

It will take around six months for your FCA regulatory permissions to come through. In the meantime you can appoint an umbrella fund manager to act as your fund manager. They will take care of all regulatory decisions and FCA compliance issues for your first funds. And you can appoint a third party custodian to hold the cash you raise and the certificates for your investments. We can introduce you to trusted counterparties.

Fundraising

We will help you write your Information Memorandum and the constitutional documentation for your EIS Fund in a way which is compliant with all Corporate, FCA and Tax rules. Then you raise the money from your former colleagues at your old investment bank who are wishing they were doing what you have done. It couldn’t be easier.

If you would like to discuss this with one of our solicitors please get in touch on +44 (0)20 3192 5690 or email us at [email protected].