Our group is about to leave the firm we have been with for 20+ years (a large wire-house). We have been talking with Finet for some time. I am very interested in structuring our business as an S-corp. However, I think there may be some issues with that because Finet will issue a 1099 for each partner instead of paying the business entity directly.
I was wondering how other independent advisor's (non RIA) structure their business to work around the 1099 issues.
Ultimately, we would like to be a true RIA but we are not there yet. This route seems to be a good first step in that direction.
We are going to consult with our CPA but I wanted to see if I could get some feedback from other business owners ahead of time.
Commissions/fees cannot be paid directly to a corporation but must go through a licensed individual.
Use the search function as there have been many discussions on this topic.
I have not been able to find many topics regarding how advisor's from LPL,RJ or Finet structure their business entity. Can you point me in right direction? Ive tried searching for "1099", "business structure" and haven't found much.
I am aware that fees and commissions cannot be paid directly to a business, that it most flow to each FA individually.
Because Finet has to pay each adviser via a 1099, doesn't this eliminate many of the benefits a business owner would get by using an s-corp or llc? Specifically, we will have to pay social security and Medicare on all 1099 income vs our alloted salary if we could have used a 1099. I was just curious how other independents worked through this issue.
I wash the 1099 through a schedule C (show all the income and an equal expense number) and note that all income is reported under S-Corp _________ EIN #XX-XXXXXXX. I don't know if it works or not, as it's not been tested with me personally, but I'm three years in without a question yet and I know of others who have done it much longer than I have. My opinion is that the IRS is more interested in the fact that all the income is reported, rather than exactly where it is reported. Whatever you do, get your CPA's blessing before you do it.
Commissions generated by a Registered Representative with a B/D must be received at the individual level and not paid to a firm. However, I have heard of Advisors who would "assign" their commissions to their S-Corp or other entity as Indyone refers to.
If your b/d allows you the ability to have your own RIA, while maintaining B/D registrations, that business can be paid directly to your RIA Firm. A good Hybrid Advisor platform should be able to accomodate this quite easily.
Good luck in your search and best wishes in 2009!