Independent Agent Working Mult. States - S Corp Vs LLC

[Chfebc]

Greetings,

I work as an independent agent and have a niche market for life insurance that comprises the majority of my business but requires me to cover 9 different states. I work with multiple carriers in those states. I was convinced that the S Corp had extra benefits for my business model when it came to taxation (and even the added protection) in comparison to a simple LLC. I have since established my Corp as an S Corp and am finding many hurdles and expenses to jump through in order to get the business licensed and appointed in each state that I work. Fees, minutes, additional licensing expenses, additional filing with the Secretary of State's office in some states, and a general lack of guidance (my CPA hasn't ever worked with an Independent Financial Adviser before, my mentors haven't looked into it, and my connections at the different carriers each have different rules that their carriers adhere to).

I am young though and plan to be in the industry for a long time, are these headaches a 1 time thing? Will this be a ton of extra work every year? On top of the tax implications, are the additional layers of protection the S Corp offers worthwhile if I am in the start of a long lucrative career in the industry?

Do independent agents use the S Corp filings instead of an LLC often?
Is my situation different because of the territory (9 diff state DOI's to deal with etc) and/or the # of carriers I work with (4)?
I do not currently have any employees or agents under me, nor do I have plans to add any for a couple years (I will eventually though).

If I have made a mistake in filing as an S Corp, what goes into changing it???

Thanks in advance!

 

[pfg1]

Why do you need to license the company itself?

I have an S Corp, but I carry all the licensing/contracts myself personally. Right now I have 4 states that I do some business in. All income/expenses run through my company. The company is not the one writing the business... I am. So I get the 1099, not my company.

 

[Chfebc]

I was under the impression that you had to license the company in each state that I wanted to receive commissions from my S corp in. This is proving difficult and costly for Ohio and Va. Some of the carriers have not required any S corp non-resident licensing (due i guess to the Producer Licensing Model Act (218-1)).
But it seems that some of my annuity carriers require it, if the commissions are to be paid to the company.

I was also under the impression that for tax reasons you always wanted the carrier to pay direct to the S corp. If they wont allow an assignment of commissions, then wouldn't you need the license in that state?

I am a little confused though, in your situation you have the Carriers pay you directly and 1099 the funds from the S Corp? Or do they pay the corporation and you 1099 from that?

 

[pfg1]

All the commissions are paid to my name - my ssn#. The IRS doesn't care what account the money is deposited in.

Some of the deposits are made directly to my company bank account (some carriers will do that, some won't) the others come to my personal checking that I have set up specifically for this reason. Then I just transfer the commission over to my corp acct, so all the $ is in one bucket. That same bucket is the one my expenses come out of.

At the end of the year I get "x" # of 1099's from all the carriers I did business with, showing commissions paid to ME and my SSN#. I guess depending on what state you live in, you may be req'd to issue a 1099 to your company for those exact same amounts. My CPA does all my stuff, they don't do that in my case.

My accounting is very easy actually doing it this way. The business bank account (and I have a business credit card) tracks basically everything I do, and makes it very clean. Shows all $ coming in and going out.

So hypothetically, say I got 5 1099's (paid to me) for $100k total commissions. That money ended up being deposited into my business checking account (either directly from the carrier, or by transfer from me). My company then shows that as the "gross income" earned this year, less any deductions/expenses (which include my salary). I get a W-2 for the income I was paid out of my company (salary). Since an SCorp is a pass through, any remaining profit goes to me anyhow on my personal tax return.

Hope that makes sense. I honestly don't know what advantages having the company be the actual agent would have, but I know it has to be a headache like you say. Accounting alone sounds like it would be a nightmare.