fund requires extensive legal documentation. The principal document establishes the fund itself, typically through a limited partnership agreement. It should be noted that funds are generally established, for tax purposes, as limited partnerships or other forms of pass-through vehicles. The agreement establishing the fund will provide for the investors to make cash contributions to the fund so the fund may then make portfolio investments. The investors generally are entitled to limited liability, which means they are responsible and liable only for the money they have agreed to put into the fund. This document generally provides the investors with only limited control rights with respect to the fund; they are passive investors. Control of the fund is generally assigned to a general partner. The general partner is under law jointly and severally liable for the obligations of the limited partnership. For that reason, the general partner is frequently a special purpose vehicle that has no assets beyond those of participating in the limited partnership. The agreement establishing the fund generally establishes the conditions that must be met in order to have the investors provide the fund with the cash to make the fund's investments and pay its ongoing obligations (including the management fee described below). This agreement also contains reporting obligations on the part of the general partner, restrictions on the transfer of ownership interests by the general partner and the investors, mechanisms to handle conflicts of interest, and a mechanism to terminate the fund and/or the general partner. The fund agreement also specifies how the proceeds of the fund's investments are to be distributed among the partners (limited and general). Generally, the proceeds of the fund's investments are distributed in accordance with a waterfall. The waterfall will provide the investors with priority with respect to a return of their invested capital and a pre-established profit, with the general partner and the investors sharing in the profits beyond such amounts. 18