Fund Formation Checklist: A Practical Checklist

Document type: Checklist Practice area: Corporate — Investment Funds Jurisdiction: United States (federal and state) Last reviewed: 5 September 2026

How to use this checklist

Work the sections in order. Sections 1 through 3 are structuring decisions that are expensive to reverse; do not begin drafting until they are settled. Sections 4 through 6 run in parallel. Sections 7 through 9 are the raise and the closings. Section 10 begins the day the fund starts operating and never ends.

Items marked [OFTEN MISSED] are the ones that show up in examinations, in diligence, and in litigation.

1. Strategy and investor base

Strategy defined with enough specificity to structure: asset class, geography, instrument type, hold period, leverage.
Target fund size and minimum viable size identified.
Target investor base identified: institutional, high-net-worth, or both.
U.S. and non-U.S. investor mix estimated.
Taxable, tax-exempt, and governmental investor mix estimated.
Benefit plan investor participation estimated. [OFTEN MISSED]
Public pension investors identified — confidentiality and public records constraints flagged.
Sovereign wealth fund or non-U.S. governmental investors identified — special representations flagged.
Formation budget prepared, including the gap between organizational expense cap and actual cost.
Source of working capital through first closing identified.

2. Investment Company Act exclusion

Exclusion selected under 15 U.S.C. § 80a-3: 3(c)(1) or 3(c)(7).
If 3(c)(1): holder counting method documented; one-hundred-owner cap tracked in a live register.
If 3(c)(1): look-through analysis run for any entity investor holding more than ten percent of voting securities. [OFTEN MISSED]
If 3(c)(1): integration analysis run across parallel funds, feeders, and alternative investment vehicles.
If 3(c)(7): qualified purchaser verification built into the subscription questionnaire — five million in investments for natural persons, twenty-five million for entities investing on a discretionary basis.
If 3(c)(7): procedure in place to prevent admission of any non-qualified purchaser, including on transfer.
Parallel fund structure evaluated if both accredited-only and qualified-purchaser investors are targeted.
"Not making a public offering" condition confirmed consistent with the chosen Regulation D route.

3. Entity chain and domicile

Main fund entity and jurisdiction selected (typically Delaware LP or LLC).
General partner entity formed, separate from the management company.
Management company formed; employment relationships housed there.
Carry vehicle structure decided — direct ownership or a separate vehicle permitting reallocation over time.
Offshore parallel or feeder decided; local counsel and administrator engaged if used.
Blocker strategy documented, including who bears the cost.
LPA authorizes formation of alternative investment vehicles and blockers.
Pro rata investment and divestment covenant included between main fund and parallel funds. [OFTEN MISSED]
All entities formed, good standing confirmed, EINs obtained, bank accounts opened.
Structure chart prepared and kept current.

4. ERISA, commodity pool, and tax analyses

ERISA

Benefit plan investor percentage projected against the twenty-five percent significant participation threshold, measured by class and excluding manager and affiliate interests.
Definitions confirmed against 29 U.S.C. § 1002.
Redemption, forced transfer, or subscription cap mechanism included in the LPA to maintain the threshold. [OFTEN MISSED]
VCOC or REOC status evaluated as a backstop; annual testing burden understood if relied on.
Testing scheduled at every closing and every transfer, not only at the first closing. [OFTEN MISSED]

Commodity pool

Determination made whether the fund may hold any commodity interest, including hedges and FX forwards, under 7 U.S.C. § 6m.
CFTC exemption selected (Rule 4.13(a)(3) or Rule 4.7) and notice filed before the first commodity interest position. [OFTEN MISSED]
Internal margin or notional cap set to stay within the exemption.
Annual reaffirmation calendared. [OFTEN MISSED]

Tax

Partnership classification confirmed under the framework of 26 U.S.C. § 7701.
Carried interest three-year holding period requirement noted and communicated to the deal team.
UBTI and ECI mitigation strategy documented for tax-exempt and non-U.S. investors.
Publicly traded partnership safe harbor mechanics built into the transfer provisions.
Partnership representative designated with defined authority and limits.
State tax filing footprint mapped.
K-1 delivery target agreed with the tax preparer.

5. Adviser registration and compliance program

Registration status determined under 15 U.S.C. § 80b-3 and the federal/state allocation in 15 U.S.C. § 80b-3a.
Exempt reporting adviser or venture capital adviser exemption analysis documented if relied on.
Form ADV Parts 1, 2A, and 2B drafted; conflicts and fee disclosure written specifically, not generally.
Form ADV filed before managing assets.
State notice filings identified and made.
Chief compliance officer appointed — senior, independent, and not overloaded.
Written compliance policies adopted with dates, covering at minimum:
- Code of ethics and personal trading pre-clearance
- Investment allocation policy — adopted before the first deal [OFTEN MISSED]
- Valuation policy with preparer, reviewer, and approver identified
- Expense allocation policy across fund, parallel vehicles, and co-investors
- Political contributions and pay-to-play policy, with a two-year lookback questionnaire for new hires [OFTEN MISSED]
- Marketing and performance presentation policy
- Custody, books and records, business continuity, cybersecurity
- Insider trading and material nonpublic information
- Gifts and entertainment
Annual compliance review scheduled.
Understanding confirmed that § 206, 15 U.S.C. § 80b-6, and the fiduciary standard of SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963) apply whether or not the adviser registers.
Post-NAPFM v. SEC, 103 F.4th 1097 (5th Cir. 2024) posture documented: which vacated requirements the fund will nonetheless deliver by contract.

6. Document set

Limited partnership agreement

Definitions reviewed line by line — especially Transaction Fee, Portfolio Investment, Capital Contribution, Investment Period, Distributable Proceeds.
Capital commitment, call mechanics, notice periods, and default remedies drafted.
Management fee: rate, base, step-down trigger and amount, recycling treatment.
Fee offset percentage and a broad offset definition capturing transaction, monitoring, advisory, consulting, board, and break-up fees under any label. [OFTEN MISSED]
Waterfall drafted: model selected, tiers ordered, write-down treatment specified, interim clawback test included.
Numeric waterfall example appended and reconciled with the administrator and accountants. [OFTEN MISSED]
Clawback: computation, escrow percentage, guarantees (several or joint and several), tax netting, survival on departure.
Expense provision drafted specifically — organizational cap, broken deal, operating partners, travel, insurance, technology, compliance.
Key person clause: persons named, time commitment standard, self-executing suspension, permitted activities during suspension, cure vote threshold.
Removal for cause: standard, evidentiary threshold, carry consequences.
No-fault removal and no-fault investment period termination: thresholds and carry consequences.
Successor fund restriction.
Advisory committee: composition, powers, conflict approval role, express disclaimer of fiduciary duty to other investors.
Transfer restrictions, withdrawal rights, ERISA mechanics.
Subscription credit facility limits: size cap and maximum days outstanding; reporting of returns with and without facility effect.
Indemnification, exculpation, and any fiduciary duty modification.
Term, extensions, dissolution, and liquidating distribution mechanics.

Private placement memorandum

Strategy, team, and track record with attribution basis stated.
Gross-to-net performance bridge included.
Risk factors drafted to the actual strategy, not from a form.
Conflicts of interest section specific and complete.
Fees and expenses section reconciled to the LPA, number by number. [OFTEN MISSED]
Summary of principal terms reconciled to the LPA by a person who drafted neither. [OFTEN MISSED]

Subscription documents

Accredited investor representations.
Qualified purchaser representations if 3(c)(7).
Benefit plan investor status question.
Bad actor questionnaire under Rule 506(d).
Anti-money laundering, beneficial ownership, and sanctions information.
Tax forms and withholding certifications.
Power of attorney and LPA signature page.

Other

General partner agreement: carry allocation, vesting, good leaver and bad leaver, forfeiture, clawback guarantees.
Management agreement.
Side letter form with preferred MFN language and carve-out list. [OFTEN MISSED]
Administration, audit, tax, and custody agreements.

7. Service providers

Fund administrator engaged; capital account, call, and distribution processing confirmed.
Auditor engaged; audit delivery date agreed and consistent with the LPA.
Tax preparer engaged; K-1 delivery target agreed.
Custody arrangements confirmed against the custody rule.
Insurance bound: errors and omissions, directors and officers, general partner liability; allocation of premium documented.
Placement agent, if used: broker registration verified under 15 U.S.C. § 78o. [OFTEN MISSED]
Placement agent pay-to-play compliance confirmed.
No transaction-based compensation paid to any unregistered person. [OFTEN MISSED]
Technology: portal, document management, and cybersecurity controls in place.

8. The offering

Exemption route selected: Rule 506(b) or 506(c) under 17 C.F.R. Part 230.
If 506(b): team trained on the general solicitation prohibition; website, conference, and press practices reviewed.
If 506(b): pre-existing substantive relationship documented for each prospect.
If 506(c): accredited investor verification procedure documented and applied.
Bad actor diligence completed for all covered persons; refreshed at each closing. [OFTEN MISSED]
Data room assembled with version control.
Marketing materials reviewed against the performance presentation requirements; net accompanies gross.
Track record portability resolved — responsibility, similarity, records, and prior firm consent. [OFTEN MISSED]
Form D filed within fifteen days of first sale.
State blue sky notice filings made and fees paid.

9. Side letters, MFN, and closings

Side letters

Side letter matrix created at the first letter, with one row per investor and one column per obligation. [OFTEN MISSED]
Excuse rights drafted to objective, administrable criteria with a determination mechanism.
Reporting obligations captured with format, content, and due date.
Co-investment priority language reconciled across all letters against realistic deal capacity.
Public records law accommodation included for public pension investors.
Advisory committee seats granted consistently with the carve-out list.
Matrix assigned to a named owner.

MFN

MFN tiered by commitment size.
Carve-outs defined: advisory committee seats, capacity and co-investment rights, status-driven regulatory terms, strategic or anchor terms.
Election window and deadline set, running from final closing.
Circulation package prepared with agreed redactions.
Elections tracked and a consolidated post-election terms statement issued. [OFTEN MISSED]

Closings

First closing: subscriptions executed, questionnaires complete, AML and sanctions screening cleared, LPA signature pages matched to the final version.
Equalization rate and computation method agreed and applied at each subsequent closing.
Bad actor and plan asset testing refreshed at each closing. [OFTEN MISSED]
Final closing date confirmed; investment period start confirmed; MFN clock started.
Closing set assembled contemporaneously: executed documents, side letters, formation and good standing certificates, Form D and state filings, service agreements, insurance binders, resolutions, dated compliance policies. [OFTEN MISSED]

10. First hundred days and the recurring calendar

First capital call issued strictly per the LPA's notice mechanics and content requirements.
Allocation rationale documented contemporaneously for the first several deals. [OFTEN MISSED]
First valuation run through the full preparer/reviewer/approver process with workpapers retained.
First advisory committee meeting held with a substantive agenda.
Compliance calendar established covering: annual compliance review; Form ADV annual updating amendment; Form PF if applicable; state notice renewals; CFTC exemption reaffirmation; blue sky renewals; audit and K-1 delivery; MFN deadline; advisory committee meetings; plan asset testing.
Side letter dated obligations merged into the same calendar. [OFTEN MISSED]
Quarterly reporting package defined and first cycle produced on time.
Fee and expense report to investors covering amounts paid to the adviser and affiliates by the fund and by portfolio companies.
Examination readiness file started: policies with adoption dates, annual review with findings and remediation, allocation and valuation documentation.