Do you operate under an LLC or just strictly as a sole proprietor?

[Will S]

I'm with an IMO but I'm wondering if I should set up an LLC for two reasons:
1. The added protection
2. The added appearance of professionalism

If you don't operate under an LLC or other official "business" name, then what name do you put under "business name" when signing up to work various senior living events to obtain leads?

 

[billyb]

I am an S Corporation. I use my full name followed by LUTCF.

 

[adjusterjack]

I'm with an IMO but I'm wondering if I should set up an LLC for two reasons:
1. The added protection

Not as much as you think. Here are comments from an attorney from another site.

The LLC form of business, like the corporation, protects the owners of the business from personal liability for the debts of the business. For example, if the LLC enters into a contract with a third party and breaches it, the LLC is liable for that, but the LLC members are not unless they personally guaranteed the contract, which is something that lenders and astute business people often insist upon. The LLC member is always responsible for his own debts and wrongs, including liability for the negligent acts he performs for the business (and for which the LLC might also be liable). There is also the possibility of "piercing the corporate veil" (google it) which is an even bigger risk for single member LLCs.

The LLC form of business does not protect the LLC from being sued. What it does, when the LLC is operated properly, is prevent the owners from being liable for the LLCs debts simply because they are owners. Owners of sole proprietorship and general partnership businesses are personally liable for all debts of the business just because they own the business. Owners of LLCs, LLPs, and corporations are not liable just because they own the business.

But the LLC does not protect owners of the business from everything. For example, an owner of a LLC will be personally liable for any loans/credit of the LLC that the owner personally guarantees. Most lenders/businesses that extend credit to small business will routinely demand those personal guarantees. You are also always liable for your negligence. So if you are negligent while doing work for the LLC and someone is injured, both you and the LLC are liable for that. You protect against that possibility with a good insurance policy. Also, the law makes owners of businesses personally liable for a few specific obligations of the LLC, like certain tax obligations for example. So where does the LLC protect you? You will not be personally liable for contracts that the LLC enters into that you do not personally guarantee. You will also not be personally liable for the debt that arises from the negligence of other employees/owners of the LLC. Again, this assumes you run the LLC properly so that a creditor cannot successfully pierce the corporate veil to go after you personally.

2. The added appearance of professionalism

The operative word: "appearance." Your customer is buying insurance from you. It's a personal relationship. He/she doesn't care what your business name is.

I'm not saying don't do LLC. I'm just saying know its limits. Then it's a personal choice.

 

[mudhound]

sole here

 

[PA Bill]

I always figured people set these things up for tax purposes. Now, if I were selling a lot of goofy annuities.....

 

[thomasm]

There's a 92% chance you won't make it 3-5 years into this business, so just buy E&O, a 1-2 mil umbrella policy and get to work!

 

[Markthebroker]

There's a 92% chance you won't make it 3-5 years into this business, so just buy E&O, a 1-2 mil umbrella policy and get to work!

 

[adjusterjack]

I always figured people set these things up for tax purposes.

An LLC is a disregarded entity for tax purposes. No tax advantage for a one man agency.

Now, if I were selling a lot of goofy annuities.....

The SEC might want a word with you - personally.

 

[jensing0406]

I'm with an IMO but I'm wondering if I should set up an LLC for two reasons:
1. The added protection
2. The added appearance of professionalism

If you don't operate under an LLC or other official "business" name, then what name do you put under "business name" when signing up to work various senior living events to obtain leads?

Here's the advice my accountant gave me and it's saved me a ton in tax money.

Form an S Corp. With an S corp you don't have to pay self employment, medicare, and social security tax. I save roughly 18k a year in taxes.

A couple of things you'll need to keep in mind to make this work. You'll need to license your business just like you did individually. Contact your IMO or the carriers and do a hierarchy change to have your personal self put under the corporation as a LOA contract under your business. All commissions will be paid to the corporation instead of you. You'll also need to put yourself on payroll. I use patriot software because it's cheap and easy to use. I set a reminder every two weeks to pay myself. The software automatically handles all the taxes that are withheld and w2 automatically generated for you. I believe it's $40 a month to use. Plus its a tax write off. Also the taxes that the business pays to you as an employee is also a write off as well.

Because S corps have a lot of pass through income they are also the least audited by the IRS, where as sole proprietorship are the most audited. When tax season comes you will need to file two tax returns, one personal and one individual. Make sure you have a good accountant to help you with all that.

I hope that helps

 

[billyb]

I too have saved a lot of money in taxes, but I have come to realize it has hurt my SS entitlement when I turned 62. I guess you have to decide to pay more tax and draw more SS or pay less tax and draw less SS.