What “exempt” actually means
Congress built an on-ramp for emerging managers: the private-fund adviser exemption and the venture-capital adviser exemption. You still file with the SEC. You do not get a full Advisers Act hall pass.
Resources · Guides
Launching a private fund
A working map for new and emerging managers: formation, service providers, offering documents, SEC and state registration, and the other laws that actually change the deal. Pick your track. The page follows you.
Private-fund or venture-capital exemption. File a short Form ADV. You are not fully SEC-registered.
01 · Your path
ERA and RIA are different businesses in the same costume
Both can launch a private fund. They do not file the same forms, carry the same exam risk, or live with the same fee rules. Toggle the track any time — tables and outcomes retune, the underlying formation work does not disappear.
The filing
An ERA files a subset of Form ADV Part 1A (typically Items 1, 2, 3, 6, 7, 10, and 11) through IARD, then updates it annually within 90 days of fiscal year-end. The SEC can and does read these filings.
Where states still bite
Federal ERA status does not erase every state. Place-of-business, notice, and de minimis rules still decide whether you file, notice-file, or register with a state securities office.
What you skip — for now
Federal Form ADV Part 2, Form CRS, Rule 206(4)-7’s written compliance program, and the Custody Rule generally attach to registered advisers. States can still impose their own manuals, exams, or fee restrictions. Plan as if you might register later.
02 · Formation
Build the chart you can defend
Entity type is not the hard part. Control, economics, and which Advisers Act box you live in are. Work these four moves in order.
01
Map the entities
Most launches are a Delaware limited partnership (the fund) with a Delaware LLC as general partner, plus a management company if you want economics and advisory contracts in different boxes. Parallel or feeder vehicles come later — only if the investor mix actually requires them.
ERAKeep the chart boring. Extra entities do not create a federal exemption you do not already have, and they do create state filings and bank KYC.
02
Pick the Company Act exemption
Private funds stay out of Investment Company Act registration by staying inside Section 3(c)(1) or 3(c)(7). That choice is a fundraising strategy, not a paperwork preference.
ERA3(c)(1) caps beneficial owners (generally 100, with a higher cap for qualifying venture funds). 3(c)(7) requires qualified purchasers. Neither exemption is the Advisers Act exemption — you still need ERA or RIA status on the manager.
03
Lock economics before drafting
Management fee, carry (or none), catch-up, hurdle, recycling, recycling limits, and who pays organization expenses. Counsel cannot draft a clean LPA until this is settled. The GP-independence decision below is part of that settlement.
ERAFederal performance-fee restrictions are lighter than for an RIA, but state rules, future registration, and LP market terms still constrain what you can charge. Write the deal you can live with after you grow.
04
Conflicts and related-person map
Deal-by-deal co-invests, affiliated service providers, principal investments, and any other product the firm already runs. Put the map on one page before the PPM tries to describe it.
ERAItem 7 and Item 10 of the ERA ADV are where related persons and other business live. Stale or cute answers here become a problem on every later filing.
03 · The fork
Carry or clean?
It is not structure type, and it is not fund size. It is this: do the adviser's principals want to share in the carry? Want carry, and affiliation follows you. A new LLC name does not change that.
Start
New co-investment or private fund idea
The adviser has a strategy, a deal, or a sponsor to back. The first question is not entity type.
Question 1
Do the adviser's principals want to share in the carry?
Exhibit A — the core fork is independence of the GP, not the paperwork around it.
| Structure | Typical economics | Investor floor | Extra cost / complexity | ERA read |
|---|---|---|---|---|
| Fixed fee only, adviser-affiliated | ~1–2% management fee | Accredited investors | Lowest — no carry-related gating | Often the cleanest first fund. States may still limit fees; file the ERA against this story. |
| Fixed fee + non-accredited pool | ~1–2% management fee | Accredited + up to 35 non-accredited | Possible investor financial-statement obligations | 506(b) only. Operationally noisy for a first close. Most emerging managers skip this. |
| Fee + carry, affiliated GP | Market-rate fee / carry | Qualified clients only (RIA) | Custody Rule audit; ADV control-affiliate disclosure | Federal 205-3 is an RIA rule, but write docs you can keep if you register. State fee rules still apply. |
| Fee + carry, independent GP | Set by the independent GP | Set by that GP’s own status | Requires a genuinely unaffiliated owner — the hardest condition in practice | Still a facts-and-control test. Paper independence with overlapping principals will not survive a later ADV. |
The integration rule
Control follows the people, not the entity name. A newly formed manager LLC does not create independence if the RIA’s own principals are running it.
Qualified client vs. accredited investor
Accredited investor is the common, lower bar for the offering. Qualified client is the higher bar — and it is the one that applies when an SEC-registered adviser’s affiliated entity collects a performance fee.
The Custody Rule audit
Any private fund affiliated with a registered adviser typically needs an annual audit by a PCAOB-registered accountant (or a surprise exam). Budget it before you commit to a small fund.
Reg D 506(b) vs. 506(c)
506(b) is relationship-based raising, no general solicitation. 506(c) allows public solicitation if every investor’s accredited status is independently verified.
Why the venture capital exemption usually doesn’t help
It covers primary investment in venture-stage companies. Buying and operating existing, cash-flowing businesses is a private-equity strategy — outside that exemption.
04 · Service providers
The bench that makes a first close look real
Legal documents do not close a fund by themselves. Administrators, auditors, custodians, and placement arrangements decide whether capital can actually land.
Fund administrator
Independent NAV, capital-account statements, investor reporting, and often AML intake. Even a first-time fund looks more serious — and is easier to audit — with a real administrator than a spreadsheet.
ERAOptional for a tiny friends-and-family close; expected by most institutions and by any auditor you later hire.
Auditor
Annual financials. For many LPs this is non-negotiable. If the Custody Rule applies, the auditor generally must be PCAOB-registered and the audit must meet the rule’s timing.
ERANot a federal ERA requirement. Still the document sophisticated LPs ask for in year one.
Custodian / brokerage
Where cash and securities sit. Prime brokers, qualified custodians, and (for some strategies) digital-asset custodians. The “right” answer follows the strategy, not the entity chart.
ERAStill required as a practical matter for anything other than a pure SPV that never holds assets itself.
Placement / broker-dealer
If someone is paid to find investors, securities-law placement-agent rules apply. An unregistered finder is not a strategy.
ERA506(b) vs 506(c) still governs how you raise. Paying an unregistered solicitor can blow the exemption.
Counsel and tax
Fund counsel, tax advisor, and (if you have ERISA money) benefits counsel. Side letters, ERISA 25% tests, and VCOC analyses are not DIY.
ERAFile the ERA ADV in the same workstream as the documents. The 60-day clock runs from commencing advisory activity.
AML / KYC and transfer
Subscription intake, accreditation or qualified-purchaser evidence, and capital-call mechanics. Administrators often own the workflow; you still own the policy.
ERABuild files as if you will register later. Missing accreditation files are expensive to recreate.
05 · Offering documents
The document set
This is the working stack, not a souvenir PPM. Each piece has a job. If two of them tell different stories about fees or control, the wrong one will be quoted back to you.
PPM / offering memorandum
Discloses strategy, risks, fees, conflicts, and offering terms to investors.
ERAStill the document LPs actually read. Match it to the ERA ADV’s description of the business.
LPA or LLC operating agreement
Governs the fund entity, GP/LP economics, removal, key-person, and reporting.
ERAMarket terms still win over clever drafting. Do not invent a waterfall you cannot administer.
Subscription agreement
Investor’s binding commitment plus eligibility representations (accredited, QP, qualified client).
ERACollect the representations you will need if you later register — including qualified-client data even if you do not need it yet.
GP operating agreement
Governs the manager/GP entity, including who owns carry and who can bind the GP.
ERAThis is the document that later decides whether you can claim independence. Write it honestly.
Investment management agreement
The advisory contract between the adviser (or an affiliate) and the fund.
ERAKeep the named adviser consistent with the ERA ADV. Do not have three entities “sort of” advising.
Form D + blue sky
Federal notice within 15 days of first sale; state notice filings where required.
ERAThe fund’s offering is separate from your ERA status. Missing Form D is its own problem.
Form ADV workstream
The manager’s filing that tells the SEC (and states) who you are and what you advise.
ERAPartial Part 1A. File within 60 days of commencing advisory activity. Update when the fund is live.
Compliance set
Manual, code of ethics, privacy, cybersecurity, valuation, and personal trading — sized to the firm.
ERANot a full federal 206(4)-7 package, but many states and all future RIA plans expect a real manual. Draft one you can grow into.
06 · SEC and state registration
Two clocks, one first close
The manager's status (ERA or RIA) and the fund's offering notices (Form D and blue sky) are related but not the same filing. Mix up the clocks and you get a period of unregistered activity that follows every later ADV.
| Topic | ERA | RIA |
|---|---|---|
| Adviser status | ERA on IARD — private-fund exemption (< $150M RAUM in the U.S., solely private funds) or VC-adviser exemption. “Exempt” is a filing status, not invisibility. | Full SEC registration on IARD. Effectiveness is typically ~45 days if the file is clean. Mid-sized advisers and eligibility tests still matter before you assume SEC vs state. |
| What you file | Partial Form ADV Part 1A. Annual updating amendment. Other-than-annual amendments when the form requires them. | Parts 1A, 2A, 2B, and CRS if retail. Annual amendment within 90 days of FYE. Brochure delivery and summary of material changes. |
| State overlay | State ERA, exempt-adviser, or IA registration depending on office, AUM, and local de minimis. Do not assume the federal box covers your home state. | Notice filings in states where you have a place of business or clients above de minimis. IARs may need separate registrations and CE. |
| The fund’s own notices | Form D (Reg D) within 15 days of first sale. Blue-sky notices on the first sale in each state that requires them. 3(c)(1)/3(c)(7) is the fund exemption, not a filing. | Same Form D / blue sky. Plus ADV disclosure of the fund as a related pool, custody, and (if triggered) Form PF for larger private-fund advisers. |
| Clock that people miss | The 60-day ERA filing window runs from commencing advisory activity — not from first close, and not from “when the PPM is pretty.” | Do not wait for the first close to amend the ADV. If you are already registered, the fund is a business change. File when the facts change. |
07 · Other applicable law
The rules that hitchhike on a simple fund
Advisers Act status is the spine. These are the other statutes and rules that most first-time managers actually hit — offering exemptions, custody, marketing, ERISA, and sometimes commodities or crypto.
Regulation D — 506(b) vs 506(c)
506(b) lets you raise from investors with whom you have a pre-existing, substantive relationship, with no general solicitation, and up to 35 non-accredited investors (with extra information-rights baggage). 506(c) allows public solicitation if every purchaser is a verified accredited investor.
ERAEmerging managers usually start 506(b) because they are calling people they already know. Switching later is possible; mixing the two in one offering is how you get a mess.
Integration / related-person reality
Control follows the people, not the entity name. A newly formed manager LLC is not independent if the RIA’s principals own or run it.
ERAThis mostly determines how painful a future SEC registration will be. Build the GP you can defend on an ADV in two years, not the one that looks tidy this week.
Custody Rule (Advisers Act Rule 206(4)-2)
Registered advisers with custody of client assets must use a qualified custodian and either a surprise exam or, for many funds, an annual audit delivered to investors.
ERAGenerally a registered-adviser rule. If you register later, an affiliated fund you already run will be waiting for you on day one of registration.
Marketing Rule (Rule 206(4)-1)
Performance, extracted performance, hypotheticals, testimonials, and paid endorsements all have specific conditions. The fund PPM does not give the adviser a free pass on LinkedIn.
ERAFederal Marketing Rule is a registered-adviser rule. Anti-fraud still applies. State advertising rules may also apply. Do not build a track record you cannot substantiate later.
Why the VC exemption often does not help
The venture-capital exemption covers a strategy: primarily investing in qualifying venture-stage companies, with limited leverage and a hold for investment — not a buy-and-operate private-equity program.
ERAIf you are backing a roll-up, buying cash-flowing businesses, or running credit, you are probably a private-fund adviser (or an RIA) — not a VC adviser. Do not file the wrong box.
ERISA, CFTC, and other overlays
Benefit-plan investors can trigger ERISA’s plan-asset rules unless you stay under the 25% test or qualify as a VCOC/REOC. Commodity interests can drag in CPO/CTA registration or exemptions. Digital assets add custody, valuation, and sometimes money-transmitter analysis.
ERAFlag these in week one. They change service-provider and document scope more than they change the ERA box.
08 · Timeline
What the launch actually looks like
Illustrative only. A clean 8–10 weeks assumes the fork is settled in week one and nobody is inventing a new exemption in week six.
Weeks 1–2
Structure & scope
Economics, exemption path, conflicts map, and the GP-independence question. No drafting until the fork is settled.
ERADecide ERA box (private-fund vs VC) and home-state overlay. Start IARD entitlement if you do not have it.
Weeks 3–6
Documentation
PPM, LPA or operating agreement, subscription docs, GP agreement, IMA. Administrator and auditor bake-off in parallel.
ERAERA ADV drafted against the same facts as the PPM. Do not let them drift.
Weeks 6–8
Regulatory filings
Form D on first sale, blue-sky notices, adviser filing. Banking and AML onboarding usually sit on this critical path.
ERAERA ADV filed within 60 days of commencing advice. Form D within 15 days of first sale — those are different clocks.
Weeks 8–10
First closing
Capital called or accepted, fund is live. After-action: minute books, investor files, and the calendar for the next amendment.
ERACalendar the annual ADV update. If you used 506(b), keep the no-solicitation hygiene after close too.
Exhibit B — illustrative only. A Custody Rule audit, if triggered, recurs annually after launch, not shown as a one-off here.
09 · Next steps
Settle the fork. Then draft.
The structuring decision above is the one to settle before any drafting starts — it determines nearly everything downstream. If you are launching as an exempt reporting adviser, start an intake and we will walk the decision tree with you.
This guide is informational, not legal advice, and it is not an offer to form a fund or to solicit investors. Facts, thresholds, and state overlays change. Confirm the path that fits your firm before you file or close.