LibraryThere are three roles that each deal in Seed Labs has: Manager, General Partner, and Principal. Each role has a different set of permissions and responsibilities.
The Manager is responsible for day-to-day decisions of the deal entity. They are the legal controller who directs the deal entity to make investment decisions. They are the legal fiduciary of the deal entity.
The Manager entity receives any applicable management fees paid out by investors to the deal entity.
The General Partner acts in an advisory role to the Manager. They provide strategic guidance and support to the Manager.
The General Partner entity receives any applicable carry fees paid out by investors to the deal entity.
The Principal acts in an informal capacity as a collaborator of the Manager. They bear no economic, legal, fiduciary, or governance rights over the deal entity by default.
If there are deal partners closely associated with the deal that should be listed, the Manager can add them as Principals to the deal entity.
The Manager, General Partner, and Principal can be either an entity or a natural person.
Any applicable fees that a deal or fund earns must be sent to the entity that is specified (Manager for management fees, General Partner for carry fees).
For example, if the Manager is a natural person, then applicable management fees will be sent to the natural person designated as the Manager, not any other entity. If the General Partner is a natural person, then applicable carry fees will be sent to the natural person, not the entity. Note that carry can be shared with deal partners via our self-service carry-share flow, whereby Seed Labs will send carry profits to the General Partner and its carry share recipients directly. Learn more about carry share here.
It's generally a good idea to consider a GP entity when some or most of the following become true:
Fee complexity: You're doing deals with co-GPs or other deal partners, need an entity to handle complex fee splits.
Liability isolation: You're doing deals with heightened risk (layered SPVs, secondary deals, etc.) and want to protect your personal assets from potential liabilities as advised by your legal or tax advisor.
Regulatory: You're looking to become an Exempt Reporting Advisor with the SEC or need to meet other regulatory requirements that are better satisfied against an entity than a natural person.
Branding: You're working with larger LPs— perhaps outside of your more immediate trust circle— that expect a heightened level of brand presence for your organization.
Most management companies are structured as Delaware LLCs. There are plenty of resources to help you set up a single-member LLC or multi-member LLC— Doola, Stripe Atlas, Bizee, LegalZoom, etc.
It is up to the General Partner to determine how they choose to be regulated as an investment advisor. This may include but is not limited to:
