Licensing Question

[Zoaty]

Hello,
I recently setup a single member LLC and have attached my license to it through NIPR. I am curious if my personal license is now invalid - i.e. am I even able to join a carrier as a sole proprietor separate from through my LLC now? Seems there are carriers don't seem to allow you to contract with them through a single member LLC agency.

I do not construe an responses as legal or financial advice etc... Just will accept them as thoughts - I realize this is not a legal or financial advice forum etc.

Thanks.

 

[DHK]

No. You must have a personal license for your personal acts and sales. If you wish to be paid as an entity, that entity is required to be licensed as well.

You can still get individually appointed with any company you want, but your commissions would be paid to you as an individual and not through your entity.

 

[Zoaty]

Thank you for your response.

So what confuses me is that my new single member LLC has been attached to my license through NIPR, it has it's own NPN, and own state license number, yet I'm confused how to receive payments through it when carriers seem to want to pay you as a 1099. Im assuming the 1099 can be setup in the business name to receive payments if the carrier allows, but why does NIPR allow you to attach your license to a single member LLC if there is no use or benefit for doing so?

My second question is what does attaching your license to a single member LLC through NIPR actually do if anything?

Thanks again for your insight.

Randy

 

[DHK]

Carriers can pay your entity a 1099 just as easily as they can pay you. They just need the details. But by law, the entity must be a licensed entity, just like a non-licensed person cannot receive compensation for the sale of contracts that require licensing to sell them.

There needs to be a licensed agent to represent the licensed entity. There must be at least one licensed agent with each entity.

Btw, unless there are specific tax benefits, there's only two reasons to set up an entity:
1) You plan on hiring employees, so having an entity limits your liability to the assets of your entity.
2) You plan on contracting other agents, so having an entity limits chargeback liability to the assets of your entity.

There is no asset protection for your own acts. That's why you have a license - to be held liable and responsible by the regulators.

 

[Zoaty]

Ok - thanks for the explanation & clearing things up - I really appreciate it. I will also pass this information along to a friend who is dealing with this matter as well.

Randy

 

[rousemark]

Carriers can pay your entity a 1099 just as easily as they can pay you. They just need the details. But by law, the entity must be a licensed entity, just like a non-licensed person cannot receive compensation for the sale of contracts that require licensing to sell them.

There needs to be a licensed agent to represent the licensed entity. There must be at least one licensed agent with each entity.

Btw, unless there are specific tax benefits, there's only two reasons to set up an entity:
1) You plan on hiring employees, so having an entity limits your liability to the assets of your entity.
2) You plan on contracting other agents, so having an entity limits chargeback liability to the assets of your entity.

There is no asset protection for your own acts. That's why you have a license - to be held liable and responsible by the regulators.

Not all states will license an"entity"...

 

[DHK]

Not all states will license an"entity"...

That may be very true. (I don't have a business entity nor am I licensed in a lot of states, so I can't verify, but I don't doubt it.)

The issue would be that if you receive commission income personally, it's difficult to assign that income to your entity so that it is taxed per the entity rules, as opposed to a personal 1099. Far better to have those commissions issued directly to the business entity where possible.

I would guess that the states that don't license entities... are probably smaller states and it probably won't make that big of a deal. I'm guessing Wyoming would be one since they also have less requirements for securities licensing in that state as well. Just a guess - I didn't look it up or anything.

 

[rousemark]

That may be very true. (I don't have a business entity nor am I licensed in a lot of states, so I can't verify, but I don't doubt it.)

The issue would be that if you receive commission income personally, it's difficult to assign that income to your entity so that it is taxed per the entity rules, as opposed to a personal 1099. Far better to have those commissions issued directly to the business entity where possible.

I would guess that the states that don't license entities... are probably smaller states and it probably won't make that big of a deal. I'm guessing Wyoming would be one since they also have less requirements for securities licensing in that state as well. Just a guess - I didn't look it up or anything.

You can assign commissions to your agency. And, the agency needs to have a licensed agent (you) or someone else.

 

[DHK]

Ah - I had it confused with receiving commissions as a registered rep or investment advisor rep (securities). You can't turn a securities commission paid to you as a rep to be assigned to your agency or entity.

Too many damn rules in my head - lol.