On a daily basis, I typically get asked the question “Should I incorporate?” Well, what does that actually mean? Incorporation is defined as creating a business that is a separate and distinct legal entity. There can be many benefits from incorporation as an insurance agent. Let’s talk about a few of those.
When you incorporate, the business can actually protect your personal assets. What this means is that the business will be liable and responsible for all debts incurred. As an insurance agent, you can be hit with large commission chargebacks, sued by clients (make sure you carry E&O), and incur large income tax bills at the end of the year. The business would be at risk and could protect you, as the owner, from having to dip into your own funds.
Most agents tend to dread tax season. This is mainly because commissions are not taxed when paid out so you will have to pay those come tax time. Typically incorporating can offer some tax benefits to help reduce federal and state income tax. Not to mention, there are many items that you can use as tax deductions like mileage to and from appointments, licensing fees, and many more.
Incorporating helps create a succession plan with your carriers. It is important, in terms of protecting your business, to have a plan in case of an emergency or even death of the owner. Should you not have an LLC, in some cases, your commissions could potentially all go back to the company. Where does this leave your family or employees if there’s no one that can take over. As an individual, we have seen agents die and their families unable to get the commission income transferred over. This would not happen if you are incorporated.
Pinnacle Financial Services is here to help you through this process. We are a full Service “FMO” that has many tools available to help you and your new endeavors. For starters, we have a national trainer (myself) that can help walk you through how to incorporate should you decide to go that route. We offer top-notch technology to our contracted agents at no cost, like our proprietary Connect4Medicare online enrollment technology. I can say this with confidence in that we offer the best agent support in the business and genuinely care about every agent that writes with us.
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