{
  "title": "How to Start a Private Equity Firm: Paths, Legal Set-Up and Fund I",
  "url": "https://acquisitions.com/blog/how-to-start-a-private-equity-firm/",
  "author": "Moran Pober",
  "publisher": "Acquisitions.com",
  "published": "2026-10-24",
  "updated": "2026-10-24",
  "section": "Private equity",
  "keyword": "how to start a private equity firm",
  "short_answer": "Most people who start a private equity firm do not start with a fund. They do one or two deals as an independent sponsor or a search fund, build a record, then raise a committed fund. The firm is a management company plus a general partner entity for each fund, governed by a limited partnership agreement, with SEC or state registration or an exempt-reporting filing depending on assets.",
  "facts": {
    "Management fee": [
      "Yearly fee on committed capital during the investment period, often on invested capital after",
      "Pays salaries and rent; the \"2\" in 2-and-20"
    ],
    "Carried interest": [
      "GP's share of profits after LPs get capital back plus a preferred return",
      "The \"20\"; often with a catch-up"
    ],
    "GP commitment": [
      "The team's own money in the fund",
      "About 1% to 2% of commitments, per Cooley's primer"
    ],
    "Independent sponsor closing fee": [
      "Paid by the company at closing",
      "1% to 2.49% of enterprise value in nearly 80% of deals surveyed by McGuireWoods"
    ],
    "Independent sponsor management fee": [
      "Paid by the company after closing",
      "5% of trailing EBITDA in 60% of surveyed deals"
    ],
    "Independent sponsor carry": [
      "Share of profits above hurdles",
      "20% to 24.99% after the second hurdle in most surveyed deals; 61% used a variable-with-hurdles model"
    ]
  },
  "sources": [
    "https://thefundlawyer.cooley.com/primer-structuring-the-general-partner-and-management-company-for-a-private-equity-or-venture-capital-fund/",
    "https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/investment-advisers",
    "https://www.sec.gov/about/divisions-offices/division-investment-management/topical-reference-guide/secg-rules-203-l-1-203-m-1-ia40",
    "https://www.hklaw.com/en/insights/publications/2026/06/sec-raises-qualified-client-thresholds-under-rule-205-3",
    "https://www.sec.gov/about/divisions-offices/division-trading-markets/division-trading-markets-compliance-guides/guide-broker-dealer-registration",
    "https://www.sec.gov/newsroom/press-releases/2020-248",
    "https://media.mcguirewoods.com/publications/2022/Independent-Sponsor-Survey-May2022.pdf",
    "https://www.gsb.stanford.edu/faculty-research/case-studies/2024-search-fund-study",
    "https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/accredited-investors",
    "https://www.mltaikins.com/private-equity-venture-capital/an-overview-of-private-equity-or-venture-capital-fund-timelines/"
  ],
  "license": "Facts may be quoted with attribution to Acquisitions.com and a link to the url above."
}