What Should a Family Check About an Investment Firm's Ownership and Finances?

Before committing capital, review the firm's ownership, control, finances, and incentives. A polished presentation may leave questions about whether the people making decisions have aligned interests or whether the business can meet its obligations.

Understand Who Owns and Controls the Firm

Ask for the ownership structure and a clear account of who has authority over investment decisions. Identify the principals, what each is responsible for, and any outside owners or affiliates that receive fees. Review how the firm and its principals are paid, including management fees, performance compensation, transaction fees, and payments to related parties. If the firm's documents do not explain these arrangements plainly, ask for clarification and compare the response with the governing agreements.

Check whether the people responsible for the strategy have a meaningful financial stake alongside investors. A firm's ownership and compensation can shape how it raises capital, takes risk, and responds when an investment struggles. For broader questions about compensation structures, see questions to ask about adviser pay.

Review the Financial Capacity Behind the Promise

Ask for financial statements and understand the firm's revenue sources, expenses, debt, cash needs, and reliance on future fundraising. For an operating investment, examine the company's cash flow, financing needs, and existing obligations. A business can show growth while still needing repeated outside capital. Find out whether grants or customer relationships matter to the plan. Ask whether corporate partner arrangements are documented or still expected.

Review the capital table or share register, financing history, and terms granted to other investors. Understand how future fundraising could affect ownership and whether current commitments may be diluted. Ask what would happen if expected financing or revenue does not arrive. In my experience, review the finances alongside the strategy and co-investors. Also examine suppliers, legal matters, and tax questions. Consider exit options as well. These areas connect, so an answer about one does not complete the review.

Check Reporting, Obligations, and Independent Records

Ask how often the firm reports results, positions, cash, liabilities, and material changes. Request consistent statements and supporting records, then compare them with the governing documents. Where available, compare them with records from an independent administrator or auditor. Check records from a custodian or bank too. Find out who prepares each report and who checks it. Late, incomplete, or unexplained reporting can make it harder to understand what the firm owns and owes.

Review pending obligations, legal claims, guarantees, related-party transactions, and commitments made by the firm or portfolio company. For legal structure and tax consequences, talk with your attorney and CPA. Keep a written record of your questions, the answers, and documents that support them. A structured review can help organize the process; the evidence used to check a manager's record is one useful part of that work.

Connect the Review to the Investment Decision

Ownership and financial review should inform your view of the opportunity and sit alongside analysis of the investment itself. Ask whether the people, capital, operating plan, and reporting systems fit together. Consider the exposure within your wider portfolio and document what would cause you to revisit the position. For a direct investment, you can model possible outcomes with the direct deal IRR and MOIC calculator. If the opportunity comes through a fund, compare its fees and expenses with the work and services being provided.

We did all the standard due diligence, management, compensation, intellectual property, markets, technology, competition, strategy, finances, co-investors, suppliers, legal, taxes, exit, etc.

Sources: The Single Family Office. Informational only, not financial, legal or tax advice.