Glossary
SPV glossary
Plain-English definitions of the terms sponsors and limited partners encounter when running a Delaware SPV.
Structure
A legal entity created to pool investor capital and hold a single asset or investment.
A special purpose vehicle formed under Delaware LLC law, the most common SPV jurisdiction in US venture and private equity.
The sponsor managing the SPV, with full control and unlimited liability for management decisions.
An investor in the SPV whose liability is limited to their committed capital.
An offshore vehicle that pools international LPs into a master SPV.
A Cayman Islands feeder fund used to pool non-US LPs into a US SPV.
The contract among the SPV's members governing economics, governance, and transfers.
An LLC structure where a named manager holds decision-making authority and members do not.
A group of investors who follow one lead into private deals, investing deal by deal rather than through a blind pool.
The person who sources a deal, sets its terms, and brings their investor group into it.
A syndicate where investors opt into each opportunity separately, with no committed capital.
Investing alongside a lead investor or fund in the same round, usually on the same terms.
Economics
The sponsor's share of an SPV's profits, paid only after LPs receive their capital back.
An annual fee paid by LPs to the sponsor for ongoing administration of the SPV.
The order in which an SPV distributes proceeds among LPs and the sponsor.
A one-time fee charged at close instead of carry, so the sponsor is paid for the work rather than the outcome.
A minimum return LPs must receive before the sponsor earns any carried interest.
A one-time charge on each LP's commitment at close, usually covering setup and admin costs.
How carried interest is divided when more than one person is responsible for a deal.
Compliance
The contract an LP signs to commit capital to an SPV.
A US investor meeting SEC income, net worth, or professional criteria, eligible to invest in private SPVs.
An SEC private placement exemption that allows accredited and up to 35 sophisticated non-accredited investors, with no general solicitation.
An SEC private placement exemption that permits general solicitation but requires verified accredited investors only.
An SEC safe harbor that exempts offerings made outside the United States from SEC registration.
Identity verification required for every LP before they can fund an SPV.
Verification of an LP entity's beneficial owners and corporate structure.
Regulatory controls to detect and prevent illicit funds from entering an SPV.
The natural people who ultimately own or control an investing entity, identified during onboarding.
Publicly advertising a private offering, which is permitted under Reg D 506(c) but not 506(b).
The offering document disclosing the deal, its terms, and its risks to prospective LPs.
Checking every investor against government sanctions and watch lists before accepting their capital.
The US statute that regulates pooled investment vehicles, and which SPVs are structured to avoid.
A private vehicle relying on the exclusion that caps it at 100 beneficial owners.
The notice an issuer files with the SEC after selling securities under a Reg D exemption.
State-level notice filings required in each state where an SPV's investors reside.
Diligence confirming that nobody involved in the offering has a disqualifying securities violation.
Operations
A request from the sponsor to LPs to fund their committed capital.
The steps to finalize allocations, sign documents, and wire capital to the underlying investment.
Back-office services for SPVs — bookkeeping, capital accounts, distributions, and tax filings.
The final amount of an SPV each LP is awarded, once commitments are reconciled against the available room.
What the operating agreement lets the sponsor do when an LP signs but fails to fund.
Operating-agreement limits on an LP's ability to sell or assign their SPV interest.
A digital token designed to hold a constant value against a reference currency, usually the US dollar.
A US dollar stablecoin issued by Circle, widely used for cross-border investment transfers.
The two main bank wire networks for SPV funding — SEPA within the euro area, SWIFT internationally.
A dedicated account number issued per investor or per deal so incoming funds reconcile automatically.
An account holding LP capital until closing conditions are met, after which it is released to the deal.
Tax
The IRS tax form an SPV issues each LP to report their share of partnership income and deductions.
The running ledger of what each LP contributed, was allocated in profit or loss, and has been paid out.
The SPV pays no entity-level tax; profit and loss flow through to each LP's own return.
A cash distribution made specifically so LPs can pay tax on income the SPV allocated to them.
The IRS forms a non-US investor files to certify foreign status and claim treaty benefits.
US tax withheld at source on income allocated to a non-US partner in an SPV.
The annual statement a non-US investor receives showing US-source income paid and tax withheld.
A corporation inserted above an investment so its owners receive dividends rather than pass-through income.
Unrelated business taxable income — income that makes an otherwise tax-exempt investor taxable.
Effectively connected income — US business income that obliges a foreign investor to file a US return.
A bilateral agreement that can reduce the US withholding rate applied to a foreign investor's income.
Investor
Allowing LPs to fund an SPV in their local currency rather than the SPV's base currency.
The cost an LP pays to convert local currency to the SPV's base currency.
A marketplace where LPs can sell their SPV positions before the underlying investment exits.
An investor with at least $5 million in investments, a higher bar than accredited investor.
An institution with at least $100 million in securities, eligible to buy privately placed securities under Rule 144A.