If I form my fund in Delaware, do Delaware's rules apply?
Beginners · Video 11 of 12 · 0:39 ·
Only some. Delaware's LLC law governs the inside of the company: how it's managed and what the operating agreement can say. Adviser rules come from where you do business, so a manager in Texas is regulated by Texas until it's large enough for the SEC. Offering notice filings follow each investor's state. And running the fund from home usually means registering the Delaware LLC in your state too, as a foreign LLC, with its own fees.
Everything here is for educational purposes only and is not legal, tax or investment advice, or an offer to buy or sell any security. Laws and thresholds change and depend on your facts, so talk to a qualified attorney before acting.
Key facts
- The formation state's LLC act governs the LLC's internal affairs.
- Investment adviser regulation follows where the adviser does business, or the SEC by size.
- State notice filings for the offering follow where investors live.
- Doing business in your home state usually requires registering the LLC there as a foreign LLC.
- Forming in Delaware doesn't change your adviser regulator.
Transcript
Founder: I'll form my fund in Delaware, so Delaware's rules apply. Right?
Operator: Only some of them. Delaware law runs the inside of your LLC: how it's governed, and what the operating agreement can say.
Founder: And everything else?
Operator: Adviser rules come from where you work. Live in Texas, and Texas is your adviser regulator, until you're big enough for the SEC.
Operator: Offering filings follow your investors. Each investor's state can want its own notice filing.
Operator: And running the fund from home usually means registering your Delaware LLC in your state too, as a foreign LLC, with its own fees.
Founder: So Delaware isn't a shortcut.
Operator: It's a good legal home for the company. It just doesn't move your regulator.
Founder: So I'll form my fund in Delaware...