With the right team and frameworks in place fund managers can bring operations in-house. In this three-part blog series, we’ll cover how you can do that, focusing on the key operational, legal, and accounting considerations. This first installment focuses on the Series LLC framework and associated documents.
Series LLCs
Series LLCs are a fairly recent development and are not available in all jurisdictions. However, they are available in key states like Delaware.
A Series LLC is like an umbrella where a single master LLC (the “Master”) can establish multiple “Series” or “Cells” under it. Any number of SPVs, funds, or other vehicles may be created as separate Series—without registering those Series with the State. For managers anticipating dozens of entities (e.g., SPVs), this structure translates into significant savings on costs and fees and also allows a manager to quickly spin up vehicles.
Importantly, when the proper guardrails are in place, the debts and liabilities of one Series are enforceable only against its own assets—not against the Master or any other Series. Moreover, because each Series is legally separate from the Master and from the other Series, it can:
- have its own ownership and management,
- hold property independent of the Master or other Series,
- contract in its own name, and
- be dissolved without affecting the Master or other Series.
Think of it as a Swiss Army Knife for fund structures–versatile and efficient. Here is an example:
A fund manager might form a single Delaware LLC (e.g., Junto Ventures LLC) and then create a Series for each investment (e.g, “ABC SPV, a series of Junto Ventures LLC” for an investment into ABC, Inc., while another could be “XYZ SPV, a series of Junto Ventures LLC” for an investment into XYZ, Inc.). The same structure can also be used to house related entities such as a GP, management company, or investment adviser, each organized as its own Series with separate assets and liabilities.
Let’s turn to the core documents in a Series LLC structure for SPVs.
Master LLC Agreement (Master LLCA)
The Master LLCA governs the entire Series LLC, and is typically designed to keep the Master “asset-light,” with most governance and day-to-day operations handled at the Series level. This means that key economic terms for each SPV—such as management fees, carried interest, manager appointment and investor protections—are set in the Series LLC Agreement, while the Master remains a streamlined, administrative shell.
Series LLC Agreement (Series LLCA)
The Series LLCA governs a specific SPV Series and is where the key economics and governance terms are covered, including:
- Fees & expenses – the fees and expenses and how they are allocated (e.g., a one-time management fee of 5% of commitments).
- Allocations & distributions – how profits and losses flow between the investors and manager (e.g., 20% carried interest).
- Investor rights & governance – provisions around voting, reporting, transfer restrictions, and other investor protections that may vary by deal.
Each Series LLCA tailors the general framework to the needs of a particular deal, making it the central document that investors and fund managers rely on for terms unique to that SPV.
Subscription Agreement (with Investor Questionnaire)
The Subscription Agreement is the contract that includes the conditions for admitting an investor into the Series. Put simply, it documents the investment and participation in the SPV.
Beyond setting the basic investment terms such as the investor’s commitment amount and timing of contributions, the Investor Questionnaire provides the manager with assurances that the investor is eligible to invest and participate in the opportunity. Assuming the manager is able to identify and understand the key issues that may arise from the information provided in the Questionnaire, which we will discuss in more detail in Part II.
Side Letter
Side Letters are supplemental agreements between a fund manager and a specific investor or portfolio company that modify or expand the baseline terms of a deal. For instance:
- For early-stage funds and SPVs – typically focus on economics and participation terms, such as reduced management fees or waivers, reduced carry or waivers, or different information or reporting rights, and rights related to investor regulatory obligations.
- Portfolio Companies – pro rata participation, board observer seats, or reporting obligations tailored to the company’s stage and financing needs (e.g., information rights).
Summary
The key to bringing fund administration in-house is building a framework that is both standardized and flexible, such as:
- Keeping the Master LLC Agreement focused on structure.
- Starting each Series LLCA with a short Key Definitions box (Manager, Carry %, Management Fee, etc.) so critical terms are easy to spot and negotiate.
- Designing Side Letter templates that fit the terms you may be willing to give out or would require.
- Creating fillable, repeatable forms that streamline the launch of new SPVs with video guides explaining more nuanced sections for comprehensive understanding and later refresher.
Once you have these core documents and a clear understanding of their contents you can stand up SPVs efficiently and with less reliance on third parties. This is the foundation for a scalable, operational model.
Look out for Part II, which will cover the securities/compliance framework, and Part III, which will address tax and operational considerations.
This post comes from Shayn Fernandez and Justin Bell at Junto Law, legal advisors to emerging fund managers as they raise funds, make investments, and navigate complex regulations.
Disclaimer: While this article was written by lawyers who enjoy operating outside the traditional lawyer and law firm “box,” we are not your lawyers. Nothing in this post should be construed as legal advice, nor does it create an attorney-client relationship. The material published above is only intended for informational, educational, and entertainment purposes. Please seek the advice of counsel, and do not apply any of the generalized material above to your facts or circumstances without speaking to an attorney.
