Subscription vs. Operating Account: Why Your Fund Needs Both

If you’re launching or managing a private investment fund, understanding the distinction between a subscription account and an operating account is essential. These two bank accounts serve different—but equally important—functions in fund management, compliance, and investor trust.

In this guide, we’ll break down the key differences, why both accounts are necessary, and how they contribute to a successful and compliant fund structure.

What Is a Subscription Account?

A subscription account is a dedicated bank account used specifically for receiving and holding investor capital contributions during the fundraising phase.

Purpose:

• Temporarily holds investor funds post-subscription
• Keeps investor capital separate from operational use until deployment
• Offers transparency and security during capital onboarding

Key Features:

• Used exclusively for capital contributions
• Does not fund day-to-day operations
• Helps ensure compliance with fund documents and investor expectations

Benefits:

• Provides a secure and auditable trail of incoming investor funds
• Enhances investor confidence during onboarding
• Minimizes risk of co-mingling funds

What Is an Operating Account?

An operating account is the primary account used by the fund to manage expenses, pay vendors, and execute investments after funds are transferred from the subscription account.

Purpose:

• Supports daily fund operations and investment activity
• Used for ongoing financial transactions post-raise

Key Features:

• Handles distributions, management fees, and property or asset expenses
• Interfaces with vendors, custodians, and service providers

Benefits:

• Keeps fund operations organized and transparent
• Enables clean accounting and audit readiness
• Ensures accurate financial management of the fund’s strategy

Why Your Fund Needs Both

Maintaining both a subscription and an operating account provides:

• Regulatory compliance: Helps meet SEC best practices and investor protection guidelines
• Financial clarity: Prevents the co-mingling of funds, ensuring clean books
• Audit preparedness: Simplifies tracking of capital flows for accountants and regulators
• Operational efficiency: Streamlines fund setup, execution, and reporting processes

By separating fundraising activities from operational ones, fund managers reduce risk and gain operational control.

Final Thoughts

Understanding the difference between a subscription account and an operating account isn’t just administrative—it’s foundational. This dual-account structure ensures your fund stays organized, transparent, and compliant.

At Verivest, we help fund managers set up and manage both types of accounts seamlessly as part of our comprehensive fund administration services. Reach out today to learn how we can support your capital raise with confidence.

Legal:

It may be helpful to engage with your fund’s legal counsel any time you are raising additional capital into your offering. Raising capital involves a sale of securities, and your lawyer can help ensure you are complying with your offering documents and any applicable securities laws.

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