Fund Setup: GP/LP vs LLC and Their Docs

Hey everybody, hope you all had a wonderful Fourth of July.

Personally, the Fourth is one of my favorite holidays.

Nothing beats being patriotic, having barbecues, and going to a fireworks show. It makes me think of the Sandlot every time.

Anywho, today I wanted to get into TWO different options that you have when legally structuring your fund, and what documents you’ll need.

My brother John, a great guy and experienced securities attorney, helped teach me this and I hope it’ll make sense to all you Rebels out there.

Let’s get to it!


In a traditional fund set up you’ll have a GP, or general partner, who will be part of the LP, or limited partnership.

If you go this route, you’ll have investors who will join your LP, which will be governed by the GP.

Meaning that the general partner will be the fund manager and make all the money and investing decisions.


In the non-traditional route you’ll set up an LLC, which will function basically as the LP.

Investors will then join the LLC, and you will aggregate yourself to it as a manager.

From there, you can define two types of classes, each with different rights and roles.

Those two classes are Class A and Class B.

Your investors will typically be Class A members, while you as the manager would be a Class B member.

Again, each class has different privileges that come with it.

In this case Class A members would not have much of a say on what goes on within the fund, while a Class B member would function similar to a GP and govern/manage the fund.

The main difference being that the LLC is viewed as one entity, while the traditional route is thought of as two separate bodies; the LP, the GP.

Two Core Documents

Each structure has slightly different fund docs.

They both require a PPM, which is the Private Placement Memorandum.

The PPMs will look similar regardless of the structure you use, as it is essentially a brochure of everything the fund will do, and the goals you are trying to achieve.

It’s really a marketing tool that funds will use to present to potential investors to get them to commit capital.

Another significant, but often overlooked part of the PPM, is the disclaimer of every possible way the investor could lose their money.

Sometimes these scenarios have nearly a 0% of ever happening, but you’ve got to throw them in there cause that’s the world we live in.

The PPM can be anywhere from as little as 30 pages to as large as 150 pages, it all depends on the fund.

Pricing also varies depending on the length and type of fund. However, on the cheap side you’re looking at around $7k, with most being somewhere between $20k to $30k.

Where the structures differs is with the second core document.

In a traditional setup you’ll use an LPA, which is the Limited Partnership Agreement.

However, the non-traditional structure will use an LLC Operating Agreement, or OA for short.

Though these documents are distinct, they both put the PPM into a more legal format.

Here is where all the finer details will be hammered out, such as how and when the distributions will take place, etc.

Sub Docs

Lastly, both structures will include a subscription document.

This document is basically a questionnaire which will verify what type of investor the person you’re pitching really is.

The reason being that most PPMs will state that they will only accept accredited investors, or qualified clients in the fund. (For more info on the different kinds of investors click here)

This form will also ask them what amount they are willing to commit to the fund.

The sub docs act as a filter and protection for you in getting the class of investor that you want into the fund.

You can potentially attach the sub docs to the LPA or OA, but normally it is a separate document.


Though the structures are different, functions are extremely similar.

The LLC route tends to be a little quicker and could be a good fit for a smaller fund, while the traditional setup remains as the dominant pattern.

I’d invite you to do further research and measure the pros and cons of each option before going all in.

Hope this was helpful!

Bridger Pennington

Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!

DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.

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