Help with Some Legal Stuff Getting Started

[squeed]

The state is NJ. I had no idea that there were variations of E&O insurance. I thought that it was $500 and it was all the same. Not to jack my own thread, but what is a good company to work with to protect you in terms of E&O?

 

[shortcut]

He did say that he was working under a general agency which nearly always, (if not always), means no brick and mortar and the guy is working out of his house. Under that situation any other licensure would likely not only be unnecessary, but not even exist. Insurance agents, in the majority of states, need only be licensed at the state level. Florida is a little picky about the way they do their fees, but that's the exception and not the rule.

I am an independent agent and had considered setting up my agency as an LLC, but didn't simply because of the business licensing requirement. My attorney explained it as such:

- An LLC is not officially considered to be a separate entity by the IRS or federal guidelines (being that the income and expenses pass through to a sole proprietor or partnership in the event of a multi-member LLC).

- STATE guidelines, however, can place certain restrictions on an LLC (which is why you file an LLC with the State, not the IRS).

- It doesn't matter WHAT type of business you own...grass cutting...insurance...mortgages...real estate AND it doesn't matter where you operate. SOME STATES REQUIRE LLC's to maintain appropriate business licensure in every single area they do business.

- An independent insurance agent is operating under another company and does NOT need to carry a business license (most of the time).

HOWEVER, setting up a LLC for any type of business could actually create a situation in which a license was required.


The real question is why set up an LLC. E & O coverage should provide sufficient protection and if you are going to have a brick and mortar location at some point, there will be liability insurance there as well. Many states may not prove to be difficult, but quite a few have very odd regulations when it comes to LLC's.

You need to check with the State and any Local areas. Asking the Department of Insurance will NOT ensure that you are in the clear because LLC's deal with all kinds of companies and will not make special exceptions for an insurance agent.

 

[alphawave2k]

Outside of the legal benefits if any, gained by incorporating, wouldn't having a company name and company website, instead of Joe Blow's Insurance Agency appear more professional?. It seems you can gain more cache and give the appearance of having a structured business, if you can pick a good company name other than your personal name. And yes, an individual's agency can have better controls and structure and service, but it's the perception that comes from a good agency name.
Though your customers will come to know you personally by your personal name, it still might be worth having a company name to include "insurance" to help with recognition. I have tried requesting marketing material from some of the carriers, but they won't print them unless you have an official agency name registered and licensed.

 

[Mr_Ed]

Any GA has records they have to keep, and part of those records include the license of any LLC that is appointed to do business through them.

The same goes for your SS#. Even though the LLC might "officially" be doing business with the GA, each agent within the LLC has to be separately appointed with both the GA and the companies they do business with.
This is federal regulations under the National Security & Freedom of Information Act to help protect against money laundering and fraud. You wont get around it.
- - - - - - - - - - - - - - - - - -


If you want to sell insurance in the US you will need to provide a SS# to any company you plan to do business with (or your GA will).


Your trying to remove yourself legally from the situation, and unfortunately you can not do this to the extent that your hoping to do.
An LLC does not prevent a client from suing you personally in civil court. It only adds another "layer" to the situation.

I assume your thinking is that the client will sue the LLC which will basically be worth nothing since all its assets will be liquid and flow through to you on a monthly basis. But compliance, due diligence, appropriateness, etc extends to all parties involved in the transaction (insurance company, GA, LLC, YOU). So in other words the client can sue everyone involved in the transaction.

But lets examine this, who owns, operates, and basically "is" the LLC? You! So once the lawyers realize this they will skip the LLC and directly go after your assets and possibly even future income. The LLC absolves you personally from any judgments or claims against it. But it does not prevent you being sued in civil court because of your personal involvement.

Your best protection from from lawsuits is a comprehensive E&O policy. E&O is not all the same and can vary greatly. Defense fees, and payment methods are one of the biggest differences in most policies. But there are many variables to E&O, and most of the cheap stuff is exactly that, cheap. Take some time and do some research, compare multiple policies at multiple price points.
This is your personal asset protection, and E&O is much more valuable than any LLC to someone in an advisory position such as yourself, so be very diligent!

SUPERB answer, scagent.

 

[scagnt83]

Though your customers will come to know you personally by your personal name, it still might be worth having a company name to include "insurance" to help with recognition. I have tried requesting marketing material from some of the carriers, but they won't print them unless you have an official agency name registered and licensed.

I have known indy agents who operate out of their home who just use "(their name) & associates) as their operating name. I have also known some who use an unregistered business name, but I wouldnt suggest that in case a client checks into your business.

But I would agree that using something other than just your name is beneficial.



What carriers are you appointed with that wont send marketing material? How are you appointed with them, directly, GA, IMO, etc?
It might be that you just have to go through channels to get it... most are too eager to send stuff in my experience.

Do you have website access? Many carriers have marketing material online now.

 

[alphawave2k]

I have known indy agents who operate out of their home who just use "(their name) & associates) as their operating name. I have also known some who use an unregistered business name, but I wouldnt suggest that in case a client checks into your business.
What carriers are you appointed with that wont send marketing material? How are you appointed with them, directly, GA, IMO, etc?
It might be that you just have to go through channels to get it... most are too eager to send stuff in my experience.

Do you have website access? Many carriers have marketing material online now.

scagnt, just sent you an email, but to answer your question, I am operating on just my name, though I have registered a website name with hosting which I'm not utilizing. I realized after the fact that it wasn't a good one and wasn't registered, so live and learn.
Part of the reason I jumped on this thread, just like most people getting started in this business, it can be confusing when trying to figure out how best to get yourself out there wrt to marketing, website, licensing of agency name, etc. It sure would be helpful if someone who has made all the mistakes writes up a quick tutorial as to how best to get started in this business, including the internet portion. Heck, they might be able to market it...I would definitely consider doing it once I know what I'm talking about.
It seems most IMO's, GA's, FMO's, etc are just interested in getting you signed up and start getting overrides, or joining an association, etc without looking at the bigger picture.
I don't want to reinvent the wheel sort of speak once I get going with a name, etc. Still getting up on the learning curve about all this including carriers, plans, etc.

 

[souldeux]

If a client is making a buying decision based on the name of the company, then they're buying from New York Life or Mass Mutual - not "Georgia Insurance Options."

As a new agent, the ONLY way to be successful is to educate yourself on the plans you're selling and build trust with potential clients. Your LLC's name isn't going to build that trust, YOU are.

At the end of the day, the guy who spends two months getting his company name just-so is going to make less money than the guy who spent those two months putting himself in front of potential clients. Don't over-think it, and don't make it harder than it already is. If you want to get set up with an agency license and name then do that down the road - but the fact is, it's all a moot point if you never get out and actually market yourself and sell something.