S or LLC Corporation?

[HuntAssuranceGroup]

Its been almost 4.5 years since I have been in the insurance industry. I worked for 2 companies as a captive agent and now I have decided to re-enter the industry as an independent agent. I will be getting my license again---did not keep up with the CE courses, getting appointed with some life/health companies, purchasing leads and beginning to provide solutions. Should I file an incorporation as an S-corp or an LLC? Any help on starting this would be wonderful. Thanks in advance.

 

[Sales71]

S Corp % 100.

 

[cfgsjohnson]

Only a suggestion! If you are going to start small as a PPGA do not worry about incorporating. It is an expense that is not necessary.

Incorporating is a good idea but there are additional expenses involved once you create an entity.

Good luck!
Cfgsjohnson
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LLC's are not true corporations,

They are limited liability Companies that can file as a corporation or partnership.

S-Corporations are corporations designed for small businesses to pass through income. S corporations cannot retain earnings.

Cfgsjohnson

 

[xrac]

S Corp % 100.

I concur. You can pay yourself a reasonable base salary. Say $30,000-$35,000 and then pay yourself any excess commissions exceeding that amount as dividends. The advantage is that the dividends are not subject to FICA and Medicare taxes. This can effectively save you 15% in taxes on a portion of your earnings.

 

[YouGotMyMoney]

nice tip xrac

 

[xrac]

nice tip xrac

There are some other advantages of being a S-corp.

 

[HuntAssuranceGroup]

Thanks everyone. This site is wonderful. I look forward to getting back into the swing of things. Life is a little different with a family now. When I was in the industry before, I had no responsiblities but now I have to protect my personal assets. What is a PPGA?

Also, if I get relicensed in October, should I get incorporated first or start contacting companies for assignement so I can get started making money. I would like to be able to use the Hunt Assurance Group name to market, etc. Thoughts on this? I am just not sure what comes first the chicken or the egg, if you know what I mean.

 

[VolAgent]

I concur. You can pay yourself a reasonable base salary. Say $30,000-$35,000 and then pay yourself any excess commissions exceeding that amount as dividends. The advantage is that the dividends are not subject to FICA and Medicare taxes. This can effectively save you 15% in taxes on a portion of your earnings.

For a single agent, is it really "reasonable" to consider commissions earned about the base salary as profits, and not compensation? I can just see the IRS having a field day with this. Do you have any examples of this surviving an audit?

 

[xrac]

For a single agent, is it really "reasonable" to consider commissions earned about the base salary as profits, and not compensation? I can just see the IRS having a field day with this. Do you have any examples of this surviving an audit?

No problem if you run it as a true business. The S-Corp picks up all expenses and pays you a salary. Expenses can include office space, supplies, telephone expenses, mileage or vehicle expense, business trips, etc. You can even pay yourself a per diem allowance if you travel over a certain distance. Talk to your CPA. I have had an S-Corp since 1993. The key issue is that the salary compensation must be reasonable. There are several other advantages. Business expense directly offset income and are not subject to some of the limitations you have if you are filing as unincorporated self-employed.

 

[VolAgent]

No problem if you run it as a true business. The S-Corp picks up all expenses and pays you a salary. Expenses can include office space, supplies, telephone expenses, mileage or vehicle expense, business trips, etc. You can even pay yourself a per diem allowance if you travel over a certain distance. Talk to your CPA. I have had an S-Corp since 1993. The key issue is that the salary compensation must be reasonable. There are several other advantages. Business expense directly offset income and are not subject to some of the limitations you have if you are filing as unincorporated self-employed.

What can you deduct as a S-Corp that you can't deduct on your schedule C as a sole prop?