LLC For Financial Advisors

Creating an LLC for your financial advisor services is an excellent way to protect your assets and ensure the longevity of your company. This company structure will provide you with certain legal protections that help distinguish the business from its owner’s personal assets. 

LLC owners also enjoy tax benefits, reduced potential liability, and streamlined operations and ownership. Are you interested to learn more? Read on to find out more about forming an LLC for financial advisors.


What is LLC?


What are the advantages of an LLC?


What are the disadvantages of an LLC?

LLC Formation

What are the steps to starting an LLC?

LLC Taxes

What are my tax obligations?


What is the cost of forming an LLC?


How does LLC compare to other business entities?


What Is An LLC?

An LLC, or Limited Liability Company, is a popular business entity among financial advisors because it is easy to set up and provides a ton of benefits to formators. In particular, LLCs combine the benefits of a partnership (pass-through taxation) and a corporation (limited liability). 

The members of an LLC can be individuals, corporations, foreign entities, and even trusts or estates. Members manage the company themselves or appoint managers depending on the needs of the company and the operating agreement. 

LLCs are established by submitting Articles of Organization to the state where they intend to operate, and they must comply with specific regulations set by their governing jurisdiction.


What Are The Advantages Of A Financial Advisor LLC?

As a financial advisor, there are many advantages to setting up your business as an LLC. Below are the most notable ones:

Liability protection

The primary benefit of setting up an LLC is the limited liability it provides. This means that you have protection against any losses in your business and will not be personally liable for any debts your business may incur. 

This is especially important for financial advisors or wealth managers because they often handle clients’ and investors’ money. If something goes wrong, the LLC protects you from being held liable for any losses.

Tax benefits

Setting up an LLC also has several tax benefits associated with it. First, an LLC offers pass-through taxation, meaning that all profits pass directly through to the owner instead of being taxed twice at corporate and individual levels, like other companies. 

In addition, depending on the state you operate in, additional tax benefits may be associated with setting up an LLC, such as reduced filing fees or exemptions from certain taxes or licenses. It’s always beneficial to research the specific laws of running an LLC in your state before making any decisions about taxes or licenses.

Professionalism and credibility

Finally, having an LLC can help add professionalism and credibility to your services. Clients tend to be more comfortable working with someone running a legitimate business, and a registered financial advisor LLC immediately helps give off that impression. 

Having an LLC also makes it easier to apply for loans or investments since banks prefer working with entities instead of sole proprietorships or partnerships.


What Are The Disadvantages Of A Financial Advisor LLC?

Setting up an LLC (limited liability company) can be a great way for financial advisors to protect their personal assets and grow their businesses. But there are also some potential drawbacks you should consider before taking this step.


Although it may not take too long to set up an LLC, it has its costs. Depending on the state where you’re setting up your financial advisor LLC, you may have to pay filing and other fees such as attorney and accounting fees. 

Additionally, if you’re running a small business, it can be difficult to justify the cost of setting up an LLC compared to other business structures, such as sole proprietorships.

Limited resources and expertise

Creating an LLC requires knowledge and experience in many areas, including legal, accounting, and taxation. If you don’t have these resources or expertise in-house, you must hire outside professionals to help you set up your LLC correctly. This can add to the cost of an LLC and may not be feasible for small businesses or those just starting out.

LLC Formation

How To Create A Financial Advisor LLC

Although the process of establishing an LLC for your financial advisor practice may appear challenging and time-consuming, fear not. By following the necessary steps and procedures, you can complete the process and overcome any potential challenges along the way.

  1. Reserve an LLC name
  2. Choose a Registered Agent
  3. File the Article of Organization
  4. Prepare an LLC Operating Agreement
  5. Get an EIN

Reserve an LLC name

The first step to setting up an LLC is reserving the company name. The name must include “limited liability company” or one of its abbreviations (LLC, L.L.C., or Ltd.) in some states. It also needs to be unique and not confuse customers with another existing company’s name. 

Once you have chosen a name, make sure that it is available by searching the database on the state website where you will be registering your LLC.

Choose a Registered Agent

Designate a registered agent for your LLC. They will be responsible for receiving all documents from the state and court on behalf of your company. 

This can either be a person who resides in the same state where the company is registered or a professional who can provide legal services, tax advice, and investment advice. CPAs and Attorneys are great examples of the latter.

File an Article of Organization

Next, file the paperwork with your state’s Secretary of State office or other relevant agency. To complete this step, you must fill out Articles of Organization provided by your state’s website and include information such as the owner’s name(s), address(es), and the purpose of your business. 

Once completed, submit this form along with payment for processing fees and wait for approval from the state before moving forward with other steps in setting up your financial advisor LLC.

Prepare an LLC Operating Agreement

Although not required in all states, having an operating agreement helps protect all members involved should any issues arise due to misunderstandings about how aspects of the business should be handled. This document outlines how members of your LLC will share profits and losses and other important areas such as voting rights. 

If you are not the only financial advisor in your company, an operating agreement is an absolute must.

Get an EIN

Lastly, apply for an employer identification number (EIN) from the IRS by submitting Form SS-4 online or through mail/phone call. This number is a unique identifier for tax purposes and must be used when filing taxes related to income generated from your financial advisor’s business activities.

LLC Taxes

How Are Financial Advisor LLCs Taxed?

As a financial advisor, you know that taxes are an important part of business finances. However, understanding the applicable taxes and fees can be overwhelming for those who have just started.

State taxes

Each state has tax laws that apply to businesses in that jurisdiction. The type of taxes and fees imposed by states vary but generally include s combination of payroll tax, property tax, sales & use tax, franchise/excise/gross receipts tax, personal income tax (for sole proprietorships), or other miscellaneous taxes or fees. 

Depending on your business location, you may also need to register for state-specific programs such as unemployment insurance or workers’ compensation.

Federal taxes

Financial advisors operating as LLCs fall under one or more of the following categories:

  • Self-employment tax
  • Employment/payroll taxes
  • Estimated quarterly income tax payments
  • Excise taxes (if applicable)

Depending on their structure, several types of taxes apply to businesses at the federal level. It’s critical to understand the taxes and expenses associated with having an LLC to ensure you comply with all federal and state laws.

Business licenses and permits

Finally, depending on your situation, you may need extra licenses and permits from your state and local governments to legally operate your advisory business. This could include: 

  • A professional license (such as a CPA license) if required by law in your jurisdiction
  • Special local licenses required by city ordinances
  • Zoning permits
  • Special certifications required by law
  • Other special permits, such as those necessary for selling securities in certain jurisdictions

Additionally, you may need to register with certain federal agencies, such as the Department of Labor or IRS, if you plan on hiring employees or engaging in certain investments or securities trading activities.


What Are The Costs Of Starting A Financial Advisor LLC?

Forming an LLC for a financial advisor business can be quite cost-effective. The initial filing fee is around $100, depending on the state where you form your LLC. 

Furthermore, ongoing costs for maintaining an LLC, such as filing annual reports and paying taxes, must be factored into the total cost and budget.

LLC Costs

State filing fee


Registered agent service


LLC formation service


Operating agreement


Business license and permits


Employer Identification Number (EIN)


Initial legal and accounting fees


Equipment and supplies


Marketing and advertising


There are also many other costs associated with forming an LLC, such as legal and accounting fees. Fortunately, they tend to be lower compared to the overall cost of forming a corporation.

Forming an LLC for a financial advisor business is affordable and can provide many benefits. Understanding the various taxes and fees associated with maintaining an LLC is essential to ensure federal and state laws compliance. Some businesses may need extra licenses or permits to operate legally.

For a more detailed overview of forming LLCs in various states, check one of our guides below:


Is LLC The Best Entity For Me?

Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.

LLC vs Corporation (C-Corp)

Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.

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LLC vs Corporation (C-Corp)

LLC vs S-Corp

Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.

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LLC vs S-Corp

LLC vs Sole Proprietorship

The primary difference is that an LLC provides limited liability protection for its owners, while a sole proprietorship does not.

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LLC vs Sole Proprietorship