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I know that this is new to most folks and that there are (only) under 10,000 people in the private equity/venture capital industry that have to worry about this, but please bear with me here.

There is absolutely no analogy to a brothel. Period.

Not even owning the building.

The operating company is just a shell. It has no ties to either the General Partner or the Limited Partners. There is a master LP agreement that allows the operating company to draw a periodic fee and use it for the expenses of the fund. The checks are then written to the employees and the rent, electricity, etc. If there is any left over, it is spent in bonuses at the end of the year. The final account balance of the operating company is left at $1.

Every company needs to have a shareholder and a President. Usually, the CFO of the firm is listed as the Secretary and the GP’s lawyer is listed as the Assistant Secretary. Either the Secretary or the Assistant Secretary signs everything - rarely does the owner or President sign anything.

The fact that Romney is the 100% owner is the big tip-off that this is a pass-thru organization. It really is meaningless.

Now, the General Partner is an organization unto itself. It used to be a Limited Partnership of its own (getting confused?) but now is usually a LLC. The deal makers have percentage stakes in the GP and specific duties and permissions (”pulling the trigger”, as we call it). There are also passive members of the GP, such as advisers and some of the office staff. These folks are called “Special Limited Partners” or something similar in LLC’s.

When a Trigger Puller retires, they usually “go limited”, which means they keep all or part of their economic interest, but give up the privilege and liability of Trigger Pulling.

http://www.nytimes.com/1994/10/16/business/the-good-life-after-goldman.html?pagewanted=all&src=pm

When one “goes limited”, it means that CANNOT have any say in the decision making of any part of the firm or its associated entities, else he risk losing everything he owns if the firm makes a bad decision or gets sued. (General Partners have UNLIMITED LIABILITY. Limited Partners only can lose their invested capital.)

Bain is one of the best advised PE firms in the world. I am sure everything Romney did was audited each year (standard practice) and that the lawyers prepared the documents for him to sign. If not, then Bain would be the only firm in the industry to do so.