Introduction

Welcome to Client Types, where you'll learn to identify the different kinds of clients an investment adviser may serve and the unique characteristics of each.

Exam Weight: Part of 30 questions

What You'll Learn

In this unit, you'll cover:

• Individuals and Sole Proprietorships: Natural persons, individual accounts, and one-owner businesses
• Business Entities: Partnerships, LLCs, and corporations, including their liability and tax structures
• Trusts and Estates: Revocable vs. irrevocable trusts, trustee duties, and estate accounts
• Foundations and Charities: Tax-exempt organizations, distribution requirements, and investment considerations

Why This Matters

As an investment adviser representative, your first step with any new client is understanding what type of entity you are serving. The entity type determines how the account is structured, who has authority to make decisions, how income is taxed, and what fiduciary obligations apply. The exam frequently tests these distinctions, especially around taxation (pass-through vs. double taxation) and liability (limited vs. unlimited).

Let's start with the simplest client type: individuals and sole proprietorships.