The Complete New Advisory Firm Startup Checklist

Starting a financial advisory firm is a significant undertaking. This checklist walks you through the essential steps, from legal structure to tax registration, with realistic timelines and costs. Follow it in order to avoid costly mistakes and get your firm off the ground smoothly.

1. Choose Your Legal Structure

Your legal structure affects taxes, liability, and compliance. Most advisory firms choose one of these:

• Sole Proprietorship: Simplest, but you are personally liable. Not recommended for advisors.
• LLC (Limited Liability Company): Offers liability protection and flexible tax treatment. Costs $100-$500 to file, depending on state.
• S Corporation: Can save on self-employment taxes, but requires payroll setup. Filing costs $100-$300, plus ongoing payroll costs.
• C Corporation: Rare for new advisory firms due to double taxation.

Action: Consult a business attorney or CPA to choose the best structure. File with your state’s Secretary of State. Expect processing time of 1-3 weeks.

2. Register for Federal and State Taxes

You need an Employer Identification Number (EIN) from the IRS, even if you have no employees. This is free and can be done online in minutes.

• Federal: Apply for EIN at IRS.gov.
• State: Register for state tax accounts (income tax, sales tax if applicable) with your state’s revenue department. Costs vary, but many are free.
• Local: Check for local business licenses or permits. Fees range from $50-$200.

Action: Complete EIN application this week. Then check your state’s requirements for new businesses.

3. Set Up Your Accounting System

Track every dollar from day one. Choose accounting software that fits your needs.

• QuickBooks Online: $30-$100/month, depending on plan.
• Xero: $20-$60/month.
• FreshBooks: $15-$50/month.
• Spreadsheet: Free, but not scalable.

Action: Open a separate business bank account and credit card. Set up your accounting software and connect it to your bank. Categorize expenses weekly.

4. Obtain Required Licenses and Registrations

As a financial advisor, you must register with the SEC or your state, depending on assets under management (AUM).

• SEC Registration: If you have $100 million or more in AUM, register with the SEC. Form ADV filing fee is $225.
• State Registration: If under $100 million, register with your state’s securities regulator. Fees range from $50-$500.
• Series 65 or 66: Most advisors need this license. Exam fee is $175-$250. Study materials cost $100-$500.

Action: Determine your registration threshold. Start the Form ADV process early, as it can take 4-8 weeks.

5. Create a Compliance Program

Compliance is not optional. You need policies and procedures to meet SEC or state requirements.

• Written Policies: Include code of ethics, privacy policy, and business continuity plan.
• Compliance Consultant: Costs $2,000-$10,000 for initial setup, depending on complexity.
• Compliance Software: $1,000-$5,000/year for tools like RIA in a Box.

Action: Hire a compliance consultant or use a template service. Draft your policies and have them reviewed by a professional.

6. Secure Professional Liability Insurance

Errors and omissions (E&O) insurance protects you if a client claims you gave bad advice. Most advisors need this.

• Cost: $2,000-$5,000/year for new firms, depending on coverage and state.
• Coverage: $1 million to $2 million per claim is standard.

Action: Get quotes from at least three insurance brokers. Compare coverage and deductibles.

7. Set Up Your Office and Technology

You can start virtual, but you need reliable tech.

• Office Space: $500-$2,000/month if you lease. Virtual office: $50-$200/month for a professional address.
• Computer and Software: $1,500-$3,000 for hardware. $500-$1,500/year for software (CRM, portfolio management, etc.).
• Client Portal: $50-$200/month for secure file sharing.

Action: Choose your office setup. Invest in a good CRM (e.g., Salesforce, Redtail) to manage client relationships.

8. Develop Your Business Plan and Budget

A business plan guides your decisions and helps with funding.

• Revenue Projections: Estimate your first-year AUM and fees. Typical fee is 1% of AUM.
• Expenses: List all startup costs and monthly overhead. Include your salary.
• Break-Even Analysis: Calculate how many clients you need to cover costs.

Action: Write a one-page business plan. Use a spreadsheet to project cash flow for 12 months.

9. Open a Retirement Plan (if applicable)

If you plan to have employees, set up a retirement plan like a 401(k) or SEP IRA.

• 401(k): Costs $500-$2,000/year for small plans.
• SEP IRA: No setup cost, but contributions are limited.

Action: Consult a retirement plan provider to choose the best option for your firm.

10. Launch and Market Your Firm

Once you are registered and compliant, it’s time to market.

• Website: $500-$5,000 for a professional site.
• Business Cards: $50-$200.
• Networking: Join local business groups, cost $100-$500/year.

Action: Create a simple website and LinkedIn profile. Start networking with CPAs and attorneys for referrals.

FAQ

Q: How long does it take to start an advisory firm? A: Expect 2-4 months from planning to launch, depending on registration speed and compliance setup.

Q: What is the biggest startup cost? A: Compliance and insurance are often the highest, totaling $5,000-$15,000 in the first year.

Q: Do I need a CPA for my firm? A: Yes, a CPA can help with tax planning and ensure you meet all obligations.

Q: Can I start part-time? A: Yes, but be aware of regulatory requirements and client expectations.

Related guides

• The Annual New Advisory Firm Review Checklist
• 7 Questions to Ask Before Buying a New Advisory Firm
• 7 Things to Know Before You Start a New Advisory Firm

The bottom line

Starting an advisory firm requires careful planning and execution. Follow this checklist in order, and you will cover legal, tax, and compliance essentials. Allocate time and budget for each step, and don’t skip the details. With a solid foundation, you can focus on serving clients and growing your practice.