The wealth management industry in the United States is expected to grow to a staggering $64.390 trillion in 2024, per Statista. This trajectory is anticipated due to the substantial market volume increase, reaching $87.350 trillion by 2028.
Also, the current market trend is a growing demand for personalized financial planning services. These findings are good news for new entrants planning to start a wealth management firm. If you want to start a wealth management limited liability company or LLC, now might be the opportune time. An LLC is a legal structure that separates business assets and debts from personal assets. It can protect you from being personally pursued for liabilities and repayments.
Fortunately, the application process is easy. The steps for forming an LLC for your wealth management company are generally the same for most industries, except for additional requirements for finance entities.
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Choose or Reserve a Business Name
The options for establishing an LLC name include:
- Choose a name and search the Internet to see if others use similar ones. If your chosen name exists, you may face legal consequences if you push through.
- Check the availability of your chosen name with your chosen state's LLC naming requirements. You can reserve the name by submitting the formation documents on their website if available. The name reservation is only eligible for up to 120 days.
- Once the name is final, purchase a domain name for your website (if you plan to create one). Domain names are separate from the state.
2. Hire a Registered Agent
Registered agents, also called statutory agents, process legal documents and official correspondence on behalf of businesses. Hiring one will help you process the legalities of the LLC application more efficiently.
A registered agent in the U.S. must possess the following qualifications:
- At least 18 years old
- A domestic corporation or LLC member
- A foreign corporation or LLC member authorized to operate in your chosen location
- Has a physical address in your chosen location
- Must be open on all regular business hours
3. File Your Articles of Organization
Afterward, file your articles of organization. This document includes:
- Your wealth management LLC's legal name (compliant with your chosen state's naming requirements)
- Physical address
- Management structure
- Details of the owners, members, and statutory agent
You can send your articles of organization to your state government's office or submit them through their website. If approved, you'll receive an approval letter with additional instructions. Otherwise, you'll receive resubmission instructions.
4. Get an EIN or TIN
Employer identification number (EIN) and tax identification (TIN) are required for most businesses. You can submit your EIN or TIN application to the Internal Revenue Service's (IRS) website.
5. Establish an Operating Agreement
Although optional, establishing an operating agreement is recommended to clarify the financial and functional decisions related to your LLC. This document will confirm who is responsible for company decisions and daily operations.
6. Process All the Required Business Licenses and Permits
Establishing a wealth management LLC involves complex regulations to ensure federal and state laws compliance. Licenses and permits vary based on your location and the type of financial services you plan to offer.
The most common licenses and permits you'll submit include:
- State Licensing: Financial services, like lending, insurance, and investment advisory, are regulated at state levels. You might be required to obtain specific registrations from your state's financial regulatory authority.
- Federal Licensing: Financial firms engaging with banking, lending, and securities may be obliged to submit federal licenses from the following agencies: the Federal Reserve, the Securities and Exchange Commission (SEC), or the Office of the Comptroller of the Currency (OCC).
- Business License: Not all companies are required to have a license in certain states, but some businesses may be required to have more than one. You might need a transaction privilege tax, withholding tax registration, or local business/occupational license/permit.
- Insurance License: If you offer insurance products, you may need licenses from your state's insurance department.
- Money Transmitter License: If you offer money transmission or remittance services, you'll likely need transmitter licenses regulated at the state and federal levels.
7. Submit a Notice of Publication
You must submit a Notice of Publication within 60 days of forming your LLC. This step is noted on the second page of the articles of organization instructions.
Once your state government approves this application, they will send instructions on how to publish the information.
8. Open a Business Bank Account
Open a business bank account to separate your company finances from personal expenses. This bank account is crucial in protecting your assets and helps simplify business bookkeeping and tax filing.
Remember that the application process and documents for LLC filing have fees. You may also be required to get other licenses and permits. Additionally, you'll need to get business insurance, e.g., General Liability, Professional Liability, Workers' Compensation, and Property.
Leverage the Market's Booming Trajectory
Establishing a wealth management LLC is straightforward when you understand the requirements. Working with a registered agent and a lawyer can ensure compliance with your state's business formation laws, helping you avoid legal consequences in the long run.
At the same time, you can leverage the opportunity to maximize the wealth management industry's growth, providing you with a significant headstart to set up your company for success.