What kind of regulations and compliance does a domestic Venture Capital fund face ?

Question

What type of regulations and compliance does a domestic (US) Venture Capital fund face when funded primarily by foreign investors from the EU. Are there specific regulations, aside from those outlined in the Investment Company Act of 1940, by either the U.S. Government or E.U. laws?

Answer 1

You are running a domestic VC fund and you are asking compliance questions on Y!A?

If yes, I'd get a compliance officer and corporate & securities structure expert in this department quick.

This is a highly complex response you are asking. I'll give you the supper skinny to start.

As a former hedge fund manager and who helped build a number of hedge funds, the structure is very similar to a VC fund. - Private Placement.

I definitely would NOT ever have a domestic US fund that is primarily funded by foreign investors. You should have an offshore fund for this group; and a separate domestic fund for only US investors.

Foreign investors are not taxed in the U.S. (they are taxed in their country). The way you have this fund structured by your question, the fund itself will be subject to U.S. tax because it is U.S. chartered. Thus, the foreign investors will be double taxed (US and in their home country).  

Wherever the fund is charted, that is where the applicable law takes place. The state you are in can also have influence.

If the fund is over $25 Mil (USD), it would be SEC registered fund; less than $25 mil, state registered.