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The Incorporation of a Financial Advisor is a relatively new process that allows advisors to maintain the benefits of the law and not have to deal with the challenges of running a business.
What is a Financial Advisor?
A financial advisor, often referred to as an investment advisor, is someone who helps people understand their personal finances and how they can invest their money. A financial advisor is typically a professional who has passed a specific exam or meets certain criteria that are required by law.
In other words, you can have a license in the state where you reside and another in the state where you do business. An Investment Advisor is a Financial Advisor who helps individuals and small businesses invest their money.
Most advisors work with people who want to invest their money on their own and do not need advice on how to buy investments or manage them. These are called “passive” investors, because they do not expect any particular level of performance from their investments.
However, there are many investors who need professional advice on how to invest their money and become “active” investors. Active investors include business owners, real estate developers, etc., who need help choosing investments that will benefit them over time.
Active investors also include those who want to participate in investment strategies that are available only through an advisor such as certain hedge funds or certain managed accounts offered by some brokerages.
How does a Financial Advisor Become an Investment Advisor?
Before being allowed to practice as an investment advisor, you must complete a series of education requirements in addition to passing exams that demonstrate your knowledge of investing and personal finance issues.
Each state has its own set of educational requirements that must be met before you can apply for your state’s investment advisor license. Once you have completed the education requirements, you must pass exams to demonstrate your knowledge of investment issues and personal finance.
Once you have completed the education and passed the exams, your state will grant you a license to practice as an investment advisor. Each state has its own requirements for how long your license will be valid. In some states, like California, your license is good for three years and in other states it is good for five years.
Financial Advisor Incorporation
Once you have become licensed as an investment advisor in a particular state, there are many options available to help protect yourself from liability and provide legal protections against others. The most common protection available is a limited liability company (LLC).
A limited liability company is a business entity that has all of the rights and privileges of a corporation but without all of the obligations that go along with being a corporation. An LLC offers its owners several advantages over sole proprietorships such as having limited liability protection against their business debts or other business debts incurred by the owners or employees of their business. It also provides additional tax benefits such as not having to pay self-employment taxes on profits or income.
