FutureForbes
Expert
- 50
Just curious what the tax benefits of forming an LLC are, and can an LLC be formed for a Street Level Agent or is it really GA, MGA, IMO level.
tax benefits of llc
- Thread starter FutureForbes
- Start date
- 2,816
There are no "tax" benefits for a single member LLC. It's a disregarded entity for income tax purposes. You would still fill out Schedule C just as if you didn't have an LLC.
- Thread starter
- #3
FutureForbes
Expert
- 50
Really, I see so if you a single Member llc, mainly it helps with protecting you assets then anything else. So why do people in this industry do it then, once the have a down line, technically doesn't everyone work for themselves.
- 15,041
A single member LLC is worthless for liability until you have an office people visit, employees or downline agents. You are always personally liable for your own actions, regardless of business structure. For a limited liability entity to be of any value, you must have liability that does not arise from your own action or inaction.
As to taxes, for Federal purposes it is unlikely an LLC is going to get you anything unless there are some deductions you can't take personally on a Schedule C. It may or may not help with state taxes.
- Thread starter
- #5
FutureForbes
Expert
- 50
Understood, so basically your E/O Insurance will protect you more then an LLC will.
- 15,041
If the act or alleged act is covered, yes.
Christian Kennedy
New Member
- 12
One great benefit is if/when you decide to sell your block of business. It's easier to transfer future commissions with an LLC, especially if you have companies that lock you in as the agent. Talk to your personal planning attorney, but it could help you with transfers of commissions to your family upon your death.
- Thread starter
- #8
FutureForbes
Expert
- 50
OK thanks. Yeah I was curious because, I follow a couple of carriers on facebook, and when post the monthly agent rankings. You see for example 1. John Smith 2. 123 Insurance, LLC. Someone told me it is because some agents, or more so MGA's with a downline, or even more so IMO's will LLC themselves, and that it has tax benefits to it.
SO I just wasn't sure what was actually up.
**Disclaimer - I am not a tax advisor, so confirm anything I say below with a CPA
I will disagree with some here on the potential tax benefits of an LLC. You can elect to have your LLC treated as an S Corp for tax purposes. This allows you to pay yourself a salary and to take distributions. The distributions aren't subject to FICA taxes. So if your salary for 2018 is less than $128.400, then the difference you take in distributions aren't subject to the 15.3% in FICA taxes. For example, lets say you have $150,000 in commissions, if you pay yourself a salary of $75,000 and distributions of $75,000, that means you wouldn't be paying FICA taxes on $53,400 (the difference between the $75,000 salary and the $128,400 income limit subject to FICA taxes).
The FICA taxes on $53,400 is $8,170.20 (this is a combined amount of the employee and employer match). Of course there are expenses to having an LLC, but it's likely not going to be over $8,000 (based on this scenario).
With that said, once your commissions get to the point of exceeding the $250,000 range, those savings on taxes disappear.
I will disagree with some here on the potential tax benefits of an LLC. You can elect to have your LLC treated as an S Corp for tax purposes. This allows you to pay yourself a salary and to take distributions. The distributions aren't subject to FICA taxes. So if your salary for 2018 is less than $128.400, then the difference you take in distributions aren't subject to the 15.3% in FICA taxes. For example, lets say you have $150,000 in commissions, if you pay yourself a salary of $75,000 and distributions of $75,000, that means you wouldn't be paying FICA taxes on $53,400 (the difference between the $75,000 salary and the $128,400 income limit subject to FICA taxes).
The FICA taxes on $53,400 is $8,170.20 (this is a combined amount of the employee and employer match). Of course there are expenses to having an LLC, but it's likely not going to be over $8,000 (based on this scenario).
With that said, once your commissions get to the point of exceeding the $250,000 range, those savings on taxes disappear.
- 11,997
Wouldn't it still be a savings on the FICA regardless of how much more you ended up making?
Similar threads
