Solo Agent: Sole Propietor, Corporation, or LLC?

[cadylou]

No- otherwise I would be a CPA and not in insurance..... To answer your question ...My very expensive CPA... He is known as the best in town... Most if the self employed. Millionaires I know are also set up this way.

I'm an LLC taking an S corp election. I was advised to pay myself a "reasonable" salary for my profession ( there are established averages for various occupations) and then to take distributions that do not exceed salary. I guess people can do what they want, but I'm Told this set up does draw scrutiny, so I'd be cautious about taking a really small salary and huge distributions.

Smacks of tax avoidance IMHO

 

[WCMason]

I'm an LLC taking an S corp election. I was advised to pay myself a "reasonable" salary for my profession ( there are established averages for various occupations) and then to take distributions that do not exceed salary. I guess people can do what they want, but I'm Told this set up does draw scrutiny, so I'd be cautious about taking a really small salary and huge distributions. Smacks of tax avoidance IMHO

I was also advised key word is reasonable but have never heard profit can't exceed salary.

 

[agentinsouth]

I was also advised key word is reasonable but have never heard profit can't exceed salary.

I have been told by several CPA's that it had to be "reasonable"
Based on what most captive P&C carriers pay.,$15k - $25K, In the gulf coast is on target.

 

[pfg1]

I'm an LLC taking an S corp election. I was advised to pay myself a "reasonable" salary for my profession ( there are established averages for various occupations) and then to take distributions that do not exceed salary. I guess people can do what they want, but I'm Told this set up does draw scrutiny, so I'd be cautious about taking a really small salary and huge distributions.

Smacks of tax avoidance IMHO

I agree with this. I'm not a tax guy, but this to me is "common sense", and using common sense will hopefully keep the tax man off our backs.

I have an S-corp. Just as an fyi... as a solo agent, unless you want your corporation to get paid directly from the carriers (which is not necessary) then you don't need to license the corp. I have all my licenses in my personal name. All commissions rec'd are paid to ME, and funnel into my business account and I pay myself a w-2 salary, etc. Some folks depending on their business structure may want or need their company to be licensed... for most indy agents they do not and its alot more expensive and a hassle with all the licensing, etc. my .02 fwiw

 

[MW Agent]

I was also advised key word is reasonable but have never heard profit can't exceed salary.

That is correct, no such rule.

 

[sirherbie]

Pfg1 i'm not understanding.All your commissions are paid to you individually then you write a check every month and deposit all the money you received into the Sub chapter s monthly?Why don't other agents do this? Also why are you not an llc with a sub chapter s election? How do you handle your taxes as at yr end you get a individual 1099 yet your also file a corp return with all the money you deposited over monthly?

 

[agentinsouth]

I agree with this. I'm not a tax guy, but this to me is "common sense", and using common sense will hopefully keep the tax man off our backs. I have an S-corp. Just as an fyi... as a solo agent, unless you want your corporation to get paid directly from the carriers (which is not necessary) then you don't need to license the corp. I have all my licenses in my personal name. All commissions rec'd are paid to ME, and funnel into my business account and I pay myself a w-2 salary, etc. Some folks depending on their business structure may want or need their company to be licensed... for most indy agents they do not and its alot more expensive and a hassle with all the licensing, etc. my .02 fwiw

You will never be able to have any subproducers w/ this structure

 

[cadylou]

You will never be able to have any subproducers w/ this structure

True. Cleaner to have legitimate LLC registration and licensing so that if you ever expand, you'd be all set to take overrides, etched.

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True. Cleaner to have legitimate LLC registration and licensing so that if you ever expand, you'd be all set to take overrides, etched.

I meant "etc." not "etched". . .

 

[OttoGraf]

Have any of you guys received advice that filing as a single-member llc through a s-corp (using "reasonable income") is not a good idea? and if so why?

 

[cadylou]

Have any of you guys received advice that filing as a single-member llc through a s-corp (using "reasonable income") is not a good idea? and if so why?

It's a good idea unless you want all of the money you pay yourself to be subject to FICA. I still pay ordinary income tax on earnings I take through distributions but only pay FICA in the salary I pay myself.