Investment Company
A business entity, either privately or publicly owned, that manages, sells, and markets investment funds to the public. Investment companies can take the form of corporations, partnerships, business trusts, or limited liability companies (LLCs) that pool capital from investors. The pooled funds are invested, and investors share in the profits and losses in proportion to […]
Investment Company Act of 1940
Investment Company Act of 1940: A U.S. federal law enacted by Congress to regulate mutual funds, closed-end funds, hedge funds, private equity funds, SPVs, and holding companies. Administered by the Investment Management division of the SEC, the Act aims to protect investors by ensuring transparency regarding the risks of purchasing and owning securities.
Investment Portfolio
The collection of companies or assets that an SPV has acquired or invested in.
Investment Round (Securities Offering)
A capital-raising event in which a company, project, SPV, or fund sells a distinct asset over a specific period. For example, a company may raise capital over a six-month period by selling Series A preferred stock (investment round), which would constitute an investment round. A subsequent investment round may occur 18 months later, with the […]
Investor (LP, limited partner)
An investor is an individual or entity that allocates capital with the expectation of generating financial returns. Investors engage in various investment vehicles, such as SPVs, funds, stocks, bonds, commodities, mutual funds, and real estate. They typically conduct technical and/or fundamental analysis to identify favorable investment opportunities and seek to balance risk and return. An […]
IRA (Individual Retirement Account)
A tax-advantaged investment account that individuals use to save for retirement. IRAs come in various types, including traditional IRAs, Roth IRAs, Simple IRAs, and SEP IRAs. SPVs may accept IRA investments, up to 25% of a fund’s total capital contributions, in accordance with ERISA fiduciary and IRS prohibited transaction rules. Only self-directed IRAs are eligible […]
Issuer
An issuer is a legal entity that creates, registers, and sells securities to raise capital for its operations. An SPV organizer is considered an issuer. SPVs issue LLC or LP membership interests to invite investors to fund the SPV’s purpose, such as acquiring a private asset. Issuers can include startup companies, large corporations, and governments. […]
ITIN (Individual Taxpayer Identification Number)
An ITIN is a 9-digit tax processing number issued to certain nonresident and resident aliens, their spouses, and dependents who are ineligible for a Social Security Number (SSN). It is formatted like an SSN (NNN-NN-NNNN), starting with the number “9.” To obtain an ITIN, individuals must complete IRS Form W-7, which requires documentation verifying foreign/alien […]
K-1
A tax document generated by Form 1065, issued by a partnership (LLC or LP) to report the income, losses, and dividends allocated to each partner. The recipient is required to include the information from the K-1 on their personal income tax return. SPVs, as partnerships, are required to file Form 1065 with the IRS annually […]
KISS
A KISS is a financial instrument between a company and an investor, where the investor provides capital in exchange for the right to purchase shares in a future equity financing round. It is a hybrid security, combining features of both debt and equity. While similar to a SAFE (Simple Agreement for Future Equity), a KISS […]
KYC (Know Your Customer)
A set of policies and procedures implemented by SPV organizers and financial institutions to verify the identity of investors. KYC requires the collection and maintenance of essential information about each investor, including the identification of individuals with authority to act on the investor’s behalf. SPV organizers must identify owners with 25% or more beneficial ownership […]
Lead (Lead Investor)
Is an investor who will put up a substantial amount of the total investment – often around 20% – usually early in the fund raising process. Leading an investment round can result in improved economic terms.
Ledger
A listing of investors at a specific point in time invested in an SPV. The ledger should include the investor’s name, amount invested, date of investment, tax identification information and contact information. Not to be confused with a general ledger which is a ledger of various asset, liabilities, equity, income and expense accounts which are […]
Limited Partner (LP)
A non-managing owner of a Limited Partnership structure, whose liability is limited to the amount of its investment. A limited partner is the technical name for investors or members of a LP or limited partnership structure. LP is also a general term (umbrella term) for investors in an investment fund or structured vehicle. SPV investors […]
Limited Partnership (LP)
See Regular LLC/LP