Editing Hedge fund (section)

===Legal entity===
Hedge fund legal structures vary depending on location and the investor(s). US hedge funds aimed at US-based, taxable investors are generally structured as [[limited partnership]]s or limited liability companies. Limited partnerships and other [[Flow-through entity|flow-through taxation]] structures assure that investors in hedge funds are not subject to both entity-level and personal-level taxation.<ref name=Lhabitant3/> A hedge fund structured as a limited partnership must have a [[general partner]]. The general partner may be an individual or a corporation. The general partner serves as the manager of the limited partnership, and has [[unlimited liability]].<ref name=Anson3>{{cite book |url=https://books.google.com/books?id=ic75IjNy4mQC&q=limited+partnership+general+partner+manages+assets |first=Mark J. P. |last=Anson |title=CAIA Level I: An Introduction to Core Topics in Alternative Investments |year=2009 |isbn=978-0-470-44702-4 |publisher=Wiley |pages=22–23}}</ref><ref name=Nichols>{{cite book |url=https://books.google.com/books?id=t7RFuEqfipwC&q=entity+level+tax&pg=PA40 |title=Investing in Hedge Funds, Revised and Updated Edition |first= Joseph G. |last= Nicholas |year=2005 |publisher=Bloomberg Press |pages=40–41|isbn=978-1-57660-184-6}}</ref> The limited partners serve as the fund's investors, and have no responsibility for management or investment decisions. Their liability is limited to the amount of money they invest for partnership interests.<ref name=Nichols/><ref name=Lhabitant411>{{cite book |url=https://books.google.com/books?id=zVubHUSOxpoC&q=limited+liability+entity+hedge+fund+partner&pg=SA2-PA64 |title=Handbook of Hedge Funds |page=4.1.1 |first= François-Serge |last=Lhabitant |year=2007 |publisher=John Wiley & Sons |isbn=978-0-470-02663-2}}</ref> As an alternative to a limited partnership arrangement, U.S. domestic hedge funds may be structured as [[Limited liability company|limited liability companies]], with members acting as corporate shareholders and enjoying protection from individual liability.<ref name=BusinessKnowledge124>{{cite book |url=https://books.google.com/books?id=uI-cJ0ZAf5sC&q=limited+liability+entity+hedge+fund+partner&pg=PA124 |title=Business Knowledge for IT in Hedge Funds |year=2008 |isbn=978-0-9554124-5-5 |publisher=Essvale Corporation Limited |page=124}}</ref>

By contrast, [[Offshore financial centre|offshore]] corporate funds are usually used for non-US investors, and when they are domiciled in an applicable offshore [[tax haven]], no entity-level tax is imposed.<ref name=Fraser-Sampson/> Many managers of offshore funds permit the participation of tax-exempt US investors, such as [[Pension fund|pensions funds]], [[Endowment fund|institutional endowments]], and [[charitable trust]]s.<ref name=Nichols/> As an alternative legal structure, offshore funds may be formed as an [[open-end fund|open-ended]] [[unit trust]] using an unincorporated [[mutual fund]] structure.<ref name=FundAssociates>{{cite web |url=http://fundassociates.com/pdfs/Offshore_vs_Onshore_Funds_Whitepaper.pdf |title=Offshore Hedge Funds vs. Onshore Hedge Funds |year=2008 |publisher=Fund Associates |access-date=13 February 2013 |archive-url=https://web.archive.org/web/20130424181824/http://fundassociates.com/pdfs/Offshore_vs_Onshore_Funds_Whitepaper.pdf |archive-date=24 April 2013 |url-status=live |df=dmy-all }}</ref> Japanese investors prefer to invest in [[unit trust]]s, such as those available in the Cayman Islands.<ref name=StrachmanHedgeJapan>{{cite book |url=https://books.google.com/books?id=4YsogxfEsNQC&q=hedge+fund+unit+trusts+japanese&pg=PA43 |first=Daniel A. |last=Strachman |title=The Fundamentals of Hedge Fund Management |year=2012 |isbn= 978-1-118-15139-6 |publisher=Wiley |page=3 |quote=If you are marketing to Japanese investors; you must have a Cayman-based unit trust. This group of investors rarely, if ever, invests in a hedge fund that is not set up as a unit trust.}}</ref>

The investment manager who organizes the hedge fund may retain an interest in the fund, either as the general partner of a limited partnership or as the holder of "founder shares" in a corporate fund.<ref name=LhabitantInvestor>{{cite book |url=https://books.google.com/books?id=zVubHUSOxpoC&q=investment+manager+hedge+fund+founder+shares&pg=SA2-PA68 |title=Handbook of Hedge Funds |page=4.2.1 |first= François-Serge |last=Lhabitant |year=2007 |publisher=John Wiley & Sons |isbn=978-0-470-02663-2}}</ref> For offshore funds structured as corporate entities, the fund may appoint a [[board of directors]]. The board's primary role is to provide a layer of oversight while representing the interests of the shareholders.<ref name=LhabitantBoard>{{cite book |url=https://books.google.com/books?id=zVubHUSOxpoC&q=investment+manager+hedge+fund+founder+shares&pg=SA2-PA68 |title=Handbook of Hedge Funds |page=4.2.2 |first= François-Serge |last=Lhabitant |year=2007 |publisher=John Wiley & Sons |isbn=978-0-470-02663-2}}</ref> However, in practice board members may lack sufficient expertise to be effective in performing those duties. The board may include both affiliated directors who are employees of the fund and independent directors whose relationship to the fund is limited.<ref name=LhabitantBoard/>