How to Start a Financial Advisory Business in 2023

Successful financial planners and wealth managers often wonder how to start a financial advisory business at some point in their career. Indeed, building a company from scratch isn’t an easy task, no matter how much experience you have as an entrepreneur. In this article, we overview the steps you need to take to register and start your company.

Step 1. Create a business plan

Creating a comprehensive business plan is essential for any business owner. It enables you to develop a clear vision and set achievable goals, identify potential obstacles, and communicate your market-winning strategy to your team. Furthermore, it helps to ensure everyone is on the same page by setting out a roadmap for the team’s actions.

There are three types of business plans that you can implement:

Lean Startup plan Operational business plan Traditional business plan
This plan is a powerful tool for early-stage businesses to create a roadmap with a focus on identifying and testing key assumptions about the market and target audience. An operational business plan typically covers only operational matters. It provides a comprehensive basis for decision-making, encompassing staffing, budgeting, and performance measurement. This business plan outlines an established business’s strategy and operations, including market analysis, company description, service offerings, marketing and sales strategy, operations, and financial projections.

A traditional business plan is ideal for a financial advising company, as it holds information to draw in investors and imparts the company’s vision to stakeholders. Moreover, market analysis is typically included, granting deep insights into the competitive environment and allowing your company to stand out.

However, when writing a business plan, it is important to consider the size of your financial consulting business and its scalability projections. Creating a business plan that fits your goals and is flexible enough to scale with your business can be difficult at first, so you can start with implementing Lean Startup planning at early stages and then switch to a traditional type of business plan.

Learn how to create a powerful business plan for your company.

We also recommend getting a peer review of your draft business plan to check that you’ve included all important details. Apart from gaining valuable advice on how to start a financial advisory business, you will get important insights on pricing models and client-winning strategies.

Step 2. Create a legal entity

By registering as a legal entity, financial advisors protect their personal assets in the event of legal disputes or liabilities that may arise from providing financial advice while remaining compliant with all federal and state requirements.

The four most widely used business structures in the United States are sole proprietorship, limited liability company (LLC), and corporation.

The 2017 Tax Cuts and Jobs Act introduced several changes that may be beneficial to businesses with certain legal structures. For instance, a 20-percent deduction of qualified business income has been added for certain passthrough entities. It should be noted that this provision is only set to remain in effect until December 31, 2025; however, it can benefit you if you’re just starting your financial advising firm. In fact, each strategy presents its own benefits and drawbacks that must be considered.

Let’s overview the most common types of legal entities you can register and the pros and cons of each.

Types of legal entities

Sole proprietorship

This structure is the easiest to maintain. The revenue you get from the business is reported on the business owner's personal tax return.

Pros Cons
It’s easy to set up a sole proprietorship. In fact, it doesn’t require you to do anything, and you will be able to avoid double taxation when you pay federal and state income tax. There are also states with no state income tax. The personal liability of owners for the business’s financial obligations exposes their personal assets, such as houses and savings, to risk. This legal structure does not provide the same level of prestige or sense of security as a corporation or limited liability company.


A C-corporation is a distinct legal entity from its proprietors that offers a convenient way to secure funding, distribute stock, and pass on ownership. C-corporations also have a low corporate tax rate of 21%.

Pros Cons
Forming a C-corporation can provide numerous benefits, such as the ability to take advantage of tax-related benefits and a broader range of allowable business expenses. Furthermore, forming a corporation shields owners from personal liability for the company’s financial obligations, thereby providing an additional layer of security. Setting up a C-corporation is more costly than setting up a sole proprietorship or limited liability company, and the paperwork and formalities are more extensive. Income generated by the corporation may be subject to double taxation.


Once a corporation has been formed, its owner can select S-corporation status by passing a resolution and submitting Form 2553 to the IRS. Taxation of an S-corporation is similar to that of a sole proprietorship, whereby the company’s income is reported on shareholders’ personal tax returns.

Pros Cons
S-corporations avoid the issue of double taxation. Owners can rest assured that they are shielded from personal liability for the company’s financial obligations. S-corporations have different tax-deductible expenses than C-corporations, with a greater cost of setup and more paperwork and formality. Additionally, they must adhere to certain restrictions, such as having no more than 100 shareholders who are all US citizens and not being owned by another business entity.

Limited Liability Company

An LLC offers the benefits of both a corporation and a sole proprietorship, including simple management and passthrough taxation, as well as the liability protection of a corporation. Using IRS Form 8832 (Entity Classification Election), a limited liability company may opt to be taxed as a C-corporation or S-corporation. In many terms it is similar to a corporation, yet there is no stock.

Pros Cons
A Limited Liability Company (LLC) offers the legal safeguards associated with a corporation while being taxed in the same manner as a sole proprietorship. Forming an LLC typically costs more than forming a sole proprietorship and entails more paperwork and adherence to formalized procedures.

You can choose any type of legal entity that suits your goals and change it with time. However, we recommend you pick either an LLC or corporation to win your clients’ trust.

Step 3. Register your company to pay taxes

For most businesses, becoming a legal entity requires nothing more than obtaining a federal tax ID. However, small businesses may choose to register with the federal government in order to obtain trademark protection or tax exempt status.

Filing Form 2553 with the IRS is necessary in order to establish an S-corporation.

However, if your business is an LLC, it is likely necessary to register with any state in which you:

  • hold face-to-face in-person meetings with clients
  • hire employees
  • establish a physical presence (have an office)

In order to register a business, most states require you to file documents with the local secretary of state, the business bureau, or some other business agency. Depending on the state, you may be able to register online, or you may need to submit paper documents in person or via mail.

Step 4. Open a business bank account

When you need a bank account, we recommend contacting different banks to compare their services and fees. Once you’ve decided on a bank, the next step is to open an account. This can be done online or by visiting a branch. The exact requirements vary by bank; however, it is likely that an in-person visit will be necessary to submit the necessary documents.

documents to open a bank account

Prior to visiting the bank, ensure you have the requisite documents as well as the minimum deposit amount.

Step 5. Set up accounting

For small business accounting, it is essential to have a balance sheet, an income statement, and a cash flow statement. Each of these documents can be created manually or using accounting software. Let’s consider each in detail.

Income statement

Income statements, otherwise known as profit and loss statements, provide a comprehensive overview of a small business’s revenue and expenses over a specified timeframe. Generally, companies will prepare both quarterly and annual income statements.

These statements highlight such components as revenue, gains, expenses, and losses that are used to calculate the net income.

Balance sheet

A balance sheet provides insights into a business’s financial health, allowing bookkeepers to easily view the company’s assets and liabilities. This type of statement outlines what the company owns and owes, and is typically prepared at the end of each quarter.

Cash flow statement

Cash flow statements show the amount of liquid assets, such as cash and cash equivalents, entering and leaving a company.

Small businesses are recommended to keep business and personal finances separate, maintaining up-to-date records and monitoring income and expenses to avoid inaccurate reporting.

Automated accounting software such as Xero, FreshBooks, or QuickBooks may help you in ensuring financial compliance.

Working with a Certified Public Accountant isn’t necessary at the start of your business. However, a CPA offers many benefits for LLCs and corporations, even though many sole proprietors are able to go without one. CPAs can analyze bookkeeping records, assist with payroll and taxes, provide financial consulting, and represent you during an Internal Revenue Service (IRS) audit.

Step 6. Get the licenses and legal permits to start your business

For those looking to start a financial advisory firm, failing to obtain the appropriate permits and licenses can be costly and may even lead to business closure. That’s why it’s important to get all the required legal permits before you start operating.

State licenses and permits

In order to ensure compliance with your state regulations, it’s necessary to conduct thorough research. Note that financial industry requirements can vary depending on the state in which you’re located. To identify the necessary permits and licenses, please refer to your state’s official website.

It is also essential to keep close track of when licenses and permits need to be renewed, as they typically expire after a set period of time. Renewing is typically simpler than having to apply for a new license or permit, so be sure to stay on top of the expiration dates.

To get more information on the licenses you need to operate in your state, refer to the US Small Business Administration.

Service agreement

Prior to initiating a new project, a financial consulting firm has to obtain a signed services agreement from their client. This agreement guarantees that expectations are clearly defined and potential legal conflicts are avoided. A service agreement should include payment details, expectations regarding the quality of services provided, and information regarding ownership of intellectual property.

Step 7. Get business insurance

It is essential for businesses to obtain insurance in order to operate legally and safely. Insurance provides financial security, safeguarding the company’s financial health. There are two different types of insurance that are designed to address your company’s needs.

General liability insurance

This type of insurance provides financial protection for businesses against claims stemming from bodily injury, personal injury, or property damage.

Professional liability insurance

This type of insurance offers financial assistance in case your company faces lawsuits regarding misrepresentation, bad advice, untrustworthiness, or copyright violations.

business insurance types

Check which type of business insurance fits you best and use it to protect your business.

Step 8. Market your financial consulting services

Creating an effective marketing strategy is essential for financial consulting firms, helping them boost brand recognition and trustworthiness, acquire clients, and maximize their return on investment. However, building a strategy that will suit your business goals while being adjustable is a complex process that requires time and effort.

The most effective methods to promote financial consulting services are search engine optimization, building a referral network, using paid web listings, and automated lead generation.

Aggregate client acquisition cost

Influencer marketing and social media marketing have also been trending in the last few years. However, they cost more and are less predictable in terms of results, and the ability to forecast results is essential for those looking to start a financial advising firm. If your budget allows you to use these methods, you can add them to your marketing plan as well, yet we recommend implementing marketing strategies that will let you forecast and measure results.

Learn about the top 15 wealth management marketing ideas for 2023 and incorporate them into your marketing plan to build your brand and increase client acquisition and ROI.

Step 9. Set up your communication workflow

Statistics gathered by reveal that 74% of businesses around the world have adopted tools to enhance their communication processes over the past year. This makes sense, as inadequate communication can have a detrimental impact on businesses, leading to wasted time and unsatisfactory customer service.

How poor communication affects business

Investing time and effort into creating an effective client communication workflow is always a wise choice when starting your business. There are multiple scalable CRM solutions available to help you improve your communication with clients right from the start, letting you build or import a client database, manage client profiles, and review historical information and tasks associated with specific clients.

Looking for a CRM solution for your financial advisory business? Check out our list of the best software to help you streamline your communication workflow!

Wrapping up

Starting a financial advisory business in 2023 is complex but achievable. With a detailed business plan, the right legal entity, all the necessary licenses and permits in place, and a well-executed marketing and communication strategy, you can create a successful financial consulting company. Sign up for the ExpertBox newsletter to get more tips on scaling your business with digital solutions.

  • To start a financial advisory business, you need to follow these steps:

    1. Create a business plan
    2. Register a legal entity
    3. Learn about taxation
    4. Open a business bank account
    5. Set up accounting process
    6. Get state licenses and permits
    7. Get business insurance
    8. Build a marketing plan
    9. Set up your communication workflow
  • The four most widely used business structures are the sole proprietorship, limited liability company (LLC), and corporation. You can choose any type of legal entity that suits your goals and change it with time. However, we recommend you pick either an LLC or corporation to win the trust of your clients.

  • A traditional business plan is ideal for a financial advising company, as it contains information to draw in investors and imparts the company’s vision to stakeholders. Moreover, market analysis is typically included, giving insights into the competitive environment and allowing your company to stand out.

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