If I want to register as a LLC for tax purposes, etc. what are the implications for my licensing?

[multipledigits]

I want to register a LLC so I can keep my business and personal stuff separate and use a business bank account.

I noticed when looking up licensing fees on NIPR that there are separate fees for producers and business entities, so now I think I might be a bit lost.

Do I need to be licensed as both Individual Producer & Business Entity Producer? (in order to use LLC for financial stuff). Am I writing policies for my clients as "John Smith" or as "John Smith, LLC."? Does that mean the AOR is the business name or individual?

 

[GoPokes]

Your accountant can probably give you some answers as well. I am set up as an S Corp, for the same reasons you mentioned. However, when I initially did it, I was not married, and I seem to remember the accountant saying the S corp was better for me in that case.

On to your other question. In order to have the commissions paid to the business bank account, I had to get a bank account for the agency, and the insurance companies dont like to pay commissions to an unlicensed bank account, so you have to get a license for the agency. And unfortunately, you will be getting TWO licenses in each state, one for you, and one for the agency. Some states charge a lot for the business/ agency non res license.

Some companies will do it, deposit into the agency bank account, but the 1099 will go to you, so the accountant does not like that.

It is expensive, but if you plan to grow, and make money, you may as well just get it over with, and commit. I have a buddy, who learned this the hard way last year, and it cost him a lot, not doing it right the first time. I know he can afford, it, and I didn't get into the specifics.

 

[MichFlor]

As @GoPokes said, you will need to license your LLC in each state that you are licensed in, in order to get carriers to pay your LLC. So this will double+ your license costs. I haven't had any issues with getting carriers to pay my S-Corp and 1099 the S-Corp.

Once your LLC is netting $40K or more, you'll want to consider changing it to being taxed as an S-Corp (or start with an S-Corp). That is where your ultimate tax savings will come. If you are taxed as an LLC, you can pay yourself a "reasonable" salary. This amount will be subject to FICA taxes. The balance of the LLC or S-Corp earnings will not be subject to FICA taxes.

Once your LLC or S-Corp's net income is significant, another BIG advantage to having the entity is the ability to set up a SOLO 401k. This will allow you to contribute a very significant amount to either a traditional or Roth 401k.

 

[DonP]

As @GoPokes said, you will need to license your LLC in each state that you are licensed in, in order to get carriers to pay your LLC. So this will double+ your license costs. I haven't had any issues with getting carriers to pay my S-Corp and 1099 the S-Corp.

Once your LLC is netting $40K or more, you'll want to consider changing it to being taxed as an S-Corp (or start with an S-Corp). That is where your ultimate tax savings will come. If you are taxed as an LLC, you can pay yourself a "reasonable" salary. This amount will be subject to FICA taxes. The balance of the LLC or S-Corp earnings will not be subject to FICA taxes.

Once your LLC or S-Corp's net income is significant, another BIG advantage to having the entity is the ability to set up a SOLO 401k. This will allow you to contribute a very significant amount to either a traditional or Roth 401k.

You can do a solo 401 k as a sole proprietor. You’d don’t need a LLC or sub chapter s .

 

[agentjhc]

I believe a single entity LLC filing taxes as an S Corp can assign the 1099s to the LLC at tax time. So pay goes to the agent as usual and then assigned.

 

[adjusterjack]

I want to register a LLC so I can keep my business and personal stuff separate and use a business bank account.

You don't need an LLC to do that. In fact, I will bet that you, like most people, have the wrong idea about what an LLC can do for you.

Read on. The following has been culled from comments made by an attorney on 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 LLC veil” 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, or monetarily damaged, 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 LLC veil to go after you personally.

The following article explains how that can happen.

Piercing the Limited Liability Veil of a Single-Member LLC | Nolo

From NOLO:

To have the limited liability protection eliminated by the court you will have to show the following:

First, there must be a unity of interest between the Single Member LLC and its member. In other words, the injured party must show that the SMLLC is not really a separate entity from its sole member. The legal system has special phrases for this situation, such as that the business is a mere alter ego of its owner, or is a mere instrumentality of its owner.

Second, the injured party must show that piercing the limited liability veil is necessary to avoid either the perpetration of a fraud or an injustice. This usually means showing that the SMLLC owner was intentionally using the company to lie to someone or otherwise harm someone.

It’s important to understand that both factors—unity of interest and fraud or injustice—need to be present in order for the SMLLC member to lose limited liability protection. Unity of interest, alone, without fraud or injustice, generally would not allow someone with a judgment against an SMLLC to gain access to the member’s personal assets.

https://www.nolo.com/legal-encyclopedia/piercing-the-limited-liability-veil-single-member-llc.html


As an insurance agent you are the face of your business. You are the one that your customer is doing business with. You are the one who will personally get sued for your mistakes, LLC or no LLC, and it's your personal assets at risk.

The best advice I can give you, and will probably be echoed by others, is make sure you have good Errors and Omissions insurance.

 

[pogo]

An agency LLC would also be advantageous for business succession. Compared to transferring an individual’s BOB, it’s much easier to add a new principal to an agency, whether in a planned transition or on an emergency basis.

 

[GoPokes]

As @GoPokes said, you will need to license your LLC in each state that you are licensed in, in order to get carriers to pay your LLC. So this will double+ your license costs. I haven't had any issues with getting carriers to pay my S-Corp and 1099 the S-Corp.

Once your LLC is netting $40K or more, you'll want to consider changing it to being taxed as an S-Corp (or start with an S-Corp). That is where your ultimate tax savings will come. If you are taxed as an LLC, you can pay yourself a "reasonable" salary. This amount will be subject to FICA taxes. The balance of the LLC or S-Corp earnings will not be subject to FICA taxes.

Once your LLC or S-Corp's net income is significant, another BIG advantage to having the entity is the ability to set up a SOLO 401k. This will allow you to contribute a very significant amount to either a traditional or Roth 401k.

The solo 401k is indeed a perk, one I wish I learned about sooner! In my experience, if you max out the Roth 401k, the employer contribution still goes into a traditional 401k account.

Also, I believe you can do the employer contribution, without doing the employee contribution.

If both the employee and employer contributions are into a traditional, they are both helpful in lowering your current taxable income, this may or may not be helpful, but it's there if needed.

 

[wehotex]

The solo 401k is indeed a perk, one I wish I learned about sooner! In my experience, if you max out the Roth 401k, the employer contribution still goes into a traditional 401k account.

Also, I believe you can do the employer contribution, without doing the employee contribution.

If both the employee and employer contributions are into a traditional, they are both helpful in lowering your current taxable income, this may or may not be helpful, but it's there if needed.

When fully retired and out of this business (or declining), I suppose that 401k withdrawals would not be subject to the self-employment tax? That would be a good perk.