Is an LLC necessary for independent agents?

[HEB_6_10]

I am looking to contract with an FMO in the near future and was wondering if I should create an LLC to operate under. I am not looking to have additional agents in my "downline," however I would like to keep business and personal separate as much as possible.

 

[adjusterjack]

An attorney on another site has written the following:

"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."

An LLC is also a disregarded entity for income tax purposes so all your business earnings and expenses get filed on a Schedule C as an individual anyway.

You can easily keep your business and personal separate by keeping separate records. Easy peasy.

I can't say for sure about the following but your state may require a separate license for the LLC.

Bottom line, you don't NEED an LLC and there is very little advantage for a one man operation to have one. But if you want one that, of course, is your privilege.

 

[Mike007]

Like adjusterjack said. You don't need one but you can get one if really want one. I went years without one. The only reason why I have an LLC now is that I combined my agency with another agent.