How to Start an Investment Company

start an investment company

Starting your own investment company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful investment company.

Importantly, a critical step in starting your own investment firm is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.

14 Steps To Start an Investment Company:

  1. Choose the Name for Your Investment Company
  2. Develop Your Investment Company Business Plan
  3. Choose the Legal Structure for Your Investment Company
  4. Secure Startup Funding for Your Investment Company (If Needed)
  5. Secure a Location for Your Business
  6. Register Your Investment Company with the IRS
  7. Open a Business Bank Account
  8. Get a Business Credit Card
  9. Get the Required Business Licenses and Permits
  10. Get Business Insurance for Your Investment Company
  11. Buy or Lease the Right Investment Company Equipment
  12. Develop Your Investment Company Marketing Materials
  13. Purchase and Setup the Software Needed to Run Your Investment Company
  14. Open for Business


1. Choose the Name for Your Investment Company

The first step to starting your own investment company is to choose your business name.  

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally, you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own investment firm:

  1. Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
  2. Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
  3. Think about marketing. Come up with a name that reflects the desired brand and/or focus of your reputable firm.


2. Develop Your Investment Company Business Plan

One of the most important steps in starting an investment firm is to develop your own business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

Your business plan should include the following sections:

  1. Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your investment firm.
  2. Company Overview – this section tells the reader about the history of your investment firm and what type of investment company you operate. For example, are you a mutual fund, hedge fund, closed-end fund, or exchange-traded fund (ETF) investment company?
  3. Industry Analysis – here you will document key information about the investment industry. Conduct market research and document how big the industry is and what trends are affecting it.
  4. Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
  5. Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
  6. Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
    • Product: Determine and document what products/services you will offer 
    • Prices: Document the prices of your products/services
    • Place: Where will your business be located and how will that location help you increase sales?
    • Promotions: What promotional methods will you use to attract customers to your investment firm? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
  1. Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
  2. Management Team – this section details the background of your company’s management members and their qualifications.
  3. Financial Plan – finally, the financial plan answers questions including the following:
    • What startup costs will you incur?
    • How will your investment firm make money?
    • What are your projected sales and expenses for the next five years?
    • Do you need to raise funding to launch your business?


3. Choose the Legal Structure for Your Investment Company

Next you need to choose a business structure for your investment company and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common business structures:

1) Sole proprietorship

A sole proprietorship is a legal entity in which the owner of the investment company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a business structure that is popular among small businesses. It is an agreement between two or more people who want to start an investment company together. The partners share in the profits and losses of the business. 

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for an investment firm include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for an investment company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your investment company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.


4. Secure Startup Funding for Your Investment Company (If Needed)

In developing your investment company business plan, you might have determined that you need to raise funding to launch your business. 

If so, the main sources of funding for an investment company to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an investment company that they believe has high potential for growth.


5. Secure a Location for Your Business

When looking for a location for your own investment firm, it’s important to find an area that will be beneficial for your business. You’ll want to look for a city with a strong economy that is welcoming to businesses. 

Another essential factor to consider is the tax environment. You’ll ideally want to find a state that has low taxes so you can keep more of your profits. 


6. Register Your Investment Company with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.


7. Open a Business Bank Account

It is important to establish a bank account in your own investment firm’s name. This process is fairly simple and involves the following steps:

  1. Identify and contact the bank you want to use
  2. Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
  3. Complete the bank’s application form and provide all relevant information
  4. Meet with a banker to discuss your business needs and establish a relationship with them
If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

8. Get a Business Credit Card

You should get a business credit card for your investment firm to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.


9. Get the Required Business Licenses and Permits

To start an investment company, you’ll need to register with the Securities and Exchange Commission. You also must obtain a securities license from the state where you plan to do business. 

You may also need a broker-dealer license, depending on the products you plan to offer. You’ll need an investment company registration and any applicable permits or licenses from the local municipality in which your company is based.

Some states have basic requirements for the minimum amount of capital you must have to start a securities company, but most do not. Additionally, you may need to file with your state’s department of corporations or secretary of state. 


10. Get Business Insurance for Your Investment Company

The type of insurance you need to operate your own investment firm depends on the type of company you operate. 

If you are a limited liability company (LLC), you need errors and omissions insurance. This type of insurance protects you from lawsuits if someone believes that you made a mistake while advising them on their investments. 

If you are a corporation, you need directors and officers insurance. This type of insurance protects you from lawsuits if someone believes that you did something wrong while running the company.

Other business insurance policies that you should consider for your investment company include:

  • General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
  • Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
  • Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
  • Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
  • Professional liability insurance: This protects your business against claims of professional negligence.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs. 


11. Buy or Lease the Right Investment Company Equipment

There are a few pieces of equipment you will need in order to start your own investment company. You’ll need a computer, phone, and internet connection. Additionally, you’ll need promotional materials such as business cards and letterheads.


12. Develop Your Investment Company Marketing Materials

Marketing materials will be required to attract and retain customers to your investment company.

The key marketing materials you will need are as follows:

  1. Logo: Spend some time developing a good logo for your investment company. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
  2. Website: Likewise, a professional investment company website provides potential clients with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how potential clients perceive you.
  3. Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your investment company.


13. Purchase and Setup the Software Needed to Run Your Investment Company

There are a few software programs that are essential for investment companies. You’ll need a financial analysis program to help you make informed decisions about what stock markets to invest in. You’ll also need a customer relationship management (CRM) program to keep track of your clients and their portfolios. Finally, you’ll need an accounting program to manage money.


14. Open for Business

You are now ready to open your investment firm. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.

Additional Resources

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How to Start an Investment Company FAQs

There are many steps involved in starting an investment company, but it's not hard. The most important part is making sure you have a clear vision and plan for your company and have the resources to make it happen. You'll need to find investors, set up your corporate structure, and develop a marketing strategy. There are also a lot of regulations governing investment companies, so make sure you're familiar with them before launching your business.

There are a few different options for starting an investment company with no experience. You could outsource the management of your investment company to a professional firm, or you could find a mentor who can help guide you through the process. Additionally, there are a number of online resources that can help you get started in the investment industry. 

Whatever route you choose, make sure you do your research and take the time to learn as much as you can about the investment process.

There is no one-size-fits-all answer to this question, as the best investment company for you will depend on your individual needs and goals. That said, investment companies can be a good idea for those who want to invest in a broad range of assets or are looking for professional help in making wise investment choices. Offering a variety of investments gives you exposure to a wide range of markets.

Venture capital firms, which provide financing for startup companies, are some of the most profitable types of investment companies. They invest in high-growth-potential firms that may not have access to traditional funding sources. Venture capital firms typically receive a significant equity stake in return for their investment.

The cost of starting an investment company will vary depending on the size and scope of the business, as well as the state or country in which it is based. However, there are a few expenses that are typical for most investment companies:

  • Licensing and regulatory fees
  • Office space and equipment
  • Staffing costs
  • Marketing and advertising expenses

Depending on the specific nature of your investment company, you may also incur additional costs such as legal fees, accounting fees, and software licensing fees. Typically, starting an investment company costs $50,000 to $100,000.

An investment company has a variety of ongoing expenses, including management and advisory fees, marketing and advertising costs, and custodial and other operational costs. Management and advisory fees are paid to the investment company's management team for their services in managing the portfolio and providing advice to investors. Marketing and advertising costs are incurred to attract new investors and keep current investors informed about the company's offerings. Custodial and other operational expenses include the cost of maintaining the investment company's infrastructure, such as its computer systems and office space.

To make money, investment companies charge investors management fees for taking care of their money. The most common way to charge these fees is by charging a percentage of total assets under management. This percentage ranges from 0.5% to 2.5% annually.

Yes, owning an investment company can be profitable. One reason for this is that you can make a lot of money if you invest in the right companies. Another reason is that you can charge your clients a management fee, which can be quite lucrative. Additionally, you can earn commissions by referring your clients to other investment companies. Finally, you can make money by investing in real estate or other types of assets.

There are a number of reasons why investment companies fail. One of the most common is that the company invested in a failed project. This can happen when the company is not able to properly assess the risk associated with a potential investment. Other reasons for failure include mismanagement of funds, fraud, and poor investment decisions.


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