Investment firms are business entities, whether privately or publicly owned, that oversee, market, and sell funds to the public. The primary function of an investment firm is to possess and manage securities for investment purposes. However, they typically provide a range of funds and investment services to investors, including portfolio management, recordkeeping, custodial, legal, accounting, and tax management services.
An investment firm can take the form of a corporation, partnership, business trust, or limited liability company (LLC) that consolidates funds from investors collectively. The pooled funds are then invested, and any profits or losses incurred by the company are shared among investors based on their individual stakes in the company. For instance, consider an investment firm that gathers and invests $10 million from various clients, who act as shareholders of the fund company. A client contributing $1 million would hold a 10% vested interest in the company, entailing a proportional share in any gains or losses realized.