The Annual New Advisory Firm Review Checklist

2026-08-21

A practical annual checklist for new advisory firms to review taxes, compliance, and finances. Includes steps, deadlines, and cost ranges.

Starting an advisory firm is a big step, and your first year brings a unique set of tax and compliance obligations. An annual review helps you catch issues early, avoid penalties, and plan for growth. This checklist walks you through the key tasks every new advisory firm should complete, with realistic timelines and costs.

1. Review Your Business Structure and Tax Elections

Your business structure (LLC, S-corp, C-corp, partnership) determines your tax forms and liability. At least once a year, confirm it still fits your situation.

Check your election status: If you elected S-corp status, verify the election is still valid. Form 2553 must have been filed on time; if not, you may need to request a late election relief.
Review owner compensation: If you are an S-corp owner, you must pay yourself a reasonable salary. The IRS expects salaries in line with industry norms. For advisory firms, that often ranges from $80,000 to $150,000, depending on revenue and region.
Consider changes: If your revenue has grown significantly, switching from a sole proprietorship to an S-corp might save on self-employment taxes. Conversely, if you are losing money, a C-corp might not be ideal.

Cost: If you use a CPA for this review, expect $500 to $1,500, depending on complexity.

2. Reconcile Your Books and Financial Statements

Accurate books are the foundation of tax filing. By the end of the first quarter, reconcile all accounts.

Bank and credit card statements: Match every transaction to your accounting software.
Income tracking: Ensure all advisory fees, commissions, and other income are recorded. Missing income can trigger an audit.
Expense categorization: Review categories for accuracy. Common errors include mixing personal and business expenses.
Run financial statements: Generate a profit and loss statement, balance sheet, and cash flow statement. Review them for anomalies.

Cost: If you outsource bookkeeping, expect $200 to $500 per month for a small firm.

3. File and Pay Estimated Taxes Quarterly

The IRS requires quarterly estimated tax payments if you expect to owe $1,000 or more. New firms often miss this.

Deadlines for 2026: April 15, June 15, September 15, and January 15, 2027.
Calculate payments: Use Form 1040-ES for individuals or Form 1120-W for corporations. Base payments on your projected annual income.
Pay online: Use the Electronic Federal Tax Payment System (EFTPS) or IRS Direct Pay. State payments may be due on the same dates.

Penalty: Underpayment penalties are around 0.5% per month on the unpaid amount. Avoid by paying at least 90% of current year tax or 100% of prior year tax (110% if AGI over $150,000).

4. Review Payroll and Employment Taxes

If you have employees, payroll taxes are a major compliance area.

Form 941: File quarterly to report federal income tax withheld and FICA taxes.
Form 940: File annually for federal unemployment tax (FUTA).
State payroll taxes: Register with your state’s workforce agency and file as required.
Verify payroll provider: If you use a service like ADP or Gusto, confirm they are handling tax deposits correctly. Costs range from $50 to $200 per month plus per-employee fees.

5. Confirm Your State and Local Tax Obligations

State taxes vary widely. New firms often overlook nexus rules.

State income tax: If your firm is in a state with income tax, file the appropriate return (e.g., Form 1120 for corporations).
Sales tax: Advisory services are often exempt, but if you sell products (e.g., financial planning software), you may owe sales tax.
Local taxes: Some cities impose gross receipts taxes or business license fees. Check with your city or county.

Cost: State filing fees range from $50 to $500 annually, depending on state and entity type.

6. Prepare for Annual Filings and Deadlines

Mark these key dates on your calendar:

March 15: Partnership and S-corp returns (Form 1065, 1120-S).
April 15: Individual and C-corp returns (Form 1040, 1120). Also the deadline for IRA contributions.
September 15: Extended partnership and S-corp returns.
October 15: Extended individual and C-corp returns.

If you need more time, file Form 4868 for an automatic 6-month extension for individuals, or Form 7004 for businesses. Extensions extend the filing deadline, not the payment deadline.

7. Review Retirement Plan Contributions

As a new firm, you have options to save for retirement and reduce taxable income.

SEP IRA: Easy to set up, with contributions up to 25% of compensation (max $69,000 in 2026). Deadline to contribute is your tax filing deadline, including extensions.
Solo 401(k): Allows higher contributions if you have no employees. You can contribute up to $23,000 as employee, plus employer profit-sharing up to 25% of compensation, total max $69,000.
Simple IRA: If you have employees, this plan has lower costs and allows employee contributions.

Cost: Setting up a SEP or Solo 401(k) is often free at major brokerages. A Simple IRA may have small administrative fees.

8. Check Your Compliance with SEC or State Regulations

As an advisory firm, you may be registered with the SEC or your state.

Form ADV: If you are a registered investment adviser (RIA), you must file an annual updating amendment within 90 days of your fiscal year end. The SEC filing fee is $225 for 2026.
State registrations: If you are state-registered, check your state’s renewal deadlines and fees, which range from $100 to $500.
Compliance manual: Update your policies, especially your code of ethics and privacy policy.

9. Plan for Next Year’s Tax Strategy

Use this review to make smart moves for the coming year.

Accelerate expenses: If you expect higher income next year, consider prepaying expenses like rent or software subscriptions.
Defer income: If you expect lower income, delay invoicing until after year-end.
Review your accountant: If your current CPA is not familiar with advisory firms, consider switching. Fees for a tax prep and planning package range from $1,500 to $5,000 for a small firm.

FAQ

Q: What if I missed a quarterly estimated tax payment? A: Pay as soon as possible. The penalty is calculated daily, so the sooner you pay, the less you owe. You can also adjust your withholding to cover the shortfall.

Q: Do I need to file a state return if I have no physical office? A: Possibly. If you have clients in a state, you may have nexus. Check each state’s rules. Some states have economic nexus thresholds, like $500,000 in sales.

Q: Can I deduct home office expenses? A: Yes, if you use a space exclusively and regularly for business. The simplified method allows $5 per square foot, up to 300 square feet, max $1,500.

Q: When should I hire a CPA? A: If you are not comfortable with tax filings, hire one before your first estimated payment. A CPA can save you money and prevent costly errors.

The bottom line

A thorough annual review is not just about filing taxes; it is about understanding your firm’s financial health. By following this checklist, you will stay compliant, avoid penalties, and position your firm for growth. Start with the tasks that have the nearest deadlines, such as estimated taxes and payroll. If you are unsure about any step, consult a professional. The cost of advice is far less than the cost of a mistake.