As an insurance agent, you may have started your career as a sole proprietor or in a partnership with other agents. As your client base expands, you begin thinking about new ways to grow your business and consider transitioning to an insurance agency.

However, that’s a whole other ball game. The insurance industry is heavily regulated, and state laws impose specific responsibilities on insurance agents. 

Starting an insurance agency from the ground up is like sailing through a stormy sea—full of regulations and liabilities. 

Just as you wouldn’t embark on such a journey without navigation tools, starting your insurance agency entails careful planning to keep your business legally compliant and poised for growth. 

The first logical step is to incorporate your agency as a separate legal entity to ensure you are not personally liable for any legal mishap. That’s where doola comes in.

We will guide you from start to finish to ensure your Limited Liability Corporation (LLC) formation journey is as seamless as possible. Whether it’s preparing paperwork or filing documents with appropriate authorities, we handle everything for you.

We’ve empowered countless entrepreneurs to live their US dream and build profitable ventures from the ground up. 

But first, we’ll demystify the LLC registration process, which is tailored specifically for insurance agencies. This will empower you to anchor your business on solid ground!

Agent to Agency: Why Should You Incorporate Your Business

Incorporating your business means creating a separate legal entity distinct from yourself as the owner. This can bring many benefits for insurance agencies, making it a wise decision.

But before you start your crusade to incorporate your agency, you must ensure your business is on point legally.

When you start thinking about starting your business as an LLC, sole proprietorship, or C-corporation, things can get muddy really fast. 

While sole proprietorships are less complicated and may be a good option for small businesses, LLC is a much better choice. 

So, if you’re an aspiring insurance entrepreneur but not quite sure where to begin, start by considering the benefits this decision will have on your business.

1. Protection of Personal Assets

As a sole proprietor or partner in a general partnership, you are personally liable for any debts or legal obligations incurred by the business. 

This means that if your agency were ever sued, creditors could pursue your personal assets, such as savings accounts or real estate.

However, when you incorporate your business as an LLC, it becomes its own legal entity with its own assets and liabilities. This separation means that should anything happen to the company, only its assets are at risk – not yours personally.

2. Tax Benefits

By registering as an LLC, you reap the benefits of flexible pass-through taxation. Unlike corporations, where you get taxed twice, first on the corporate level and then as an individual, you will only be taxed once on the profits passed on to you. 

Additionally, LLCs often have lower tax rates than individuals in higher income brackets, which can lead to significant savings for your business. 

You also gain access to different tax deductions and credits that are not available to individuals operating as sole proprietors.

LLC owners do not have to pay taxes on their company’s losses and choose whether they want to be taxed as a sole proprietorship or partnership. 

However, it’s best to consult with a tax professional before making any decisions about incorporation solely based on tax considerations.

3. Multiple Ownerships/Investors

If your goal is to grow and expand your insurance agency through partnerships, being an LLC makes this process easier. 

You can onboard multiple owners/investors as members, each with their share of ownership and financial responsibilities.

Because the insurance company is registered with the state, you also have access to a wider pool of resources and financing opportunities.

4. Growth Potential

If you plan to expand significantly in terms of revenue and employees, incorporating early on can help establish credibility with potential investors and clients. 

It also allows for easier ownership transferability in case new partners or shareholders are ever needed.

Additionally, incorporating can legitimize your insurance agency by creating a separation between you as an individual and the entity representing your business. 

Clients may feel more secure knowing that they are dealing with a registered company rather than just one person running everything.

5. Simple and Flexible

Furthermore, an LLC has fewer formalities and paperwork than other business structures, such as corporations. This makes it easier and more cost-effective to set up and maintain. 

Unlike corporations that have strict rules regarding ownership transfer and shareholder meetings, LLCs offer more flexibility when it comes to management and decision-making processes.

Registering as an LLC offers numerous benefits for insurance agencies but in a nutshell, there are two main benefits to forming an LLC. 

The first is protection, which means you will not lose your house if you get sued! The second is growth since it’s much easier to have employees, build credibility, and keep more of your profits in your pockets.

Now that we have this covered let’s understand how easy it is to form an LLC.

doola’s Step-by-Step Guide to Set Up an LLC

LLC formation process is much simpler and has more streamlined compliance requirements compared to corporations. This means less paperwork and lower maintenance costs for your insurance agency.

But still, there’s always the risk of something going wrong when you do it on your own. Luckily, the formation experts at doola will help you do it right the first time.

Here is how we will guide you through the necessary steps to register your business as an LLC:

1. Choose a Business Name

The first step in registering your LLC is choosing a unique business name that represents your brand. It should not be similar to any other registered business name in your state. 

We will conduct a name search on the Secretary of State’s website to ensure its availability. We will also check your state’s business registry to ensure your preferred name is not already in use.

Since building an online presence is essential for new businesses, we also recommend checking whether your preferred business name has a domain name available on GoDaddy.

2. Appoint a Registered Agent

A registered agent is a person or entity responsible for receiving legal and tax documents on behalf of your LLC. This can be you, a family member, or a registered agent service physically located in the state where your LLC is incorporated. 

Go with doola’s Registered Agent service, which will handle all your business mail and notices to ensure you never miss critical deadlines without worrying about your personal information.

However, if you have the Registered Agent position covered but need a US address for a P.O. box, you can get one through our truster partners, Virtual Post Mail.

3. File Articles of Organization

To officially form an LLC, you will need to file Articles of Organization with the Secretary of State’s office in the state where your business is located. 

This document includes basic information about your LLC, such as its name, purpose, management structure, and Registered Agent.

Along with the Articles of Organization and required documents, you will also need to pay a small registration fee, which varies from $50 to $500, depending on your state.

We will prepare all the necessary forms and documents as per the state’s laws and file them on your behalf to ensure smooth registration without a single glitch.

4. Create an Operating Agreement

Although not required by all states, it is recommended that you create an Operating Agreement for your LLC. This document outlines ownership rights, management structure, and operational procedures for your business.

doola’s comprehensive Operating Agreement service analyzes the critical elements of your business to create a customized Operating Agreement in compliance with state laws and regulations.

This will help you establish a smoother decision-making process and clear separation between personal and business assets. 

5. Obtain an EIN

An Employer Identification Number (EIN) is like a social security number issued to businesses registered with state authorities and the IRS. LLCs must obtain an EIN to hire employees, file taxes, add multiple members, or open a business bank account. 

While you can apply for an EIN for free on the IRS website, even a minor error can lead to unexpected delays or rejection. 

That’s why we will handle your EIN application, navigating complex IRS forms and procedures to ensure swift approval.

6. Obtain Licenses and Permits

While setting up an LLC for your insurance agency makes it a legitimate business in the eyes of state and federal authorities, you still need to jump through some legal hoops.

Some states, such as Arizona, Georgia, and Nebraska, require LLCs to publish a notice of formation in a local newspaper once they are formed. 

Almost all agencies require resident insurance agency licenses to operate within state lines. It works just like the licenses insurance agents and brokers need to sell insurance policies but on a business level.

A surplus lines insurance agency license enables agencies to offer policies for highly complex risks that traditional insurers aren’t willing to cover.

Depending on the state, you may need to secure a general business license for your insurance agency. Check with your state’s Secretary of State office for any requirements.

Most states require LLCs to register for state taxes. This typically includes a sales and use tax permit, which allows you to collect and remit sales tax on insurance premiums.

7. Open a Business Bank Account

As an LLC owner, it is crucial to keep your personal and business finances separate. This means opening a business bank account for your insurance agency and not mixing personal expenses with business expenses. 

Not only does it provide a more robust financial standing for your business, but it also helps with managing taxes but also protects your personal assets in case of any legal disputes.

We recommend choosing a bank that offers additional services like international wires, credit cards, or lines of credit. 

Mercury, a digital bank tailored explicitly for startups, offers these and other useful tools for managing cash flow and reconciling your agency’s transactions.

8. Maintain Compliance

Congratulations—you have successfully registered your insurance agency as an LLC! But registering is just the start; now comes the critical task.

To maintain LLC status, you must comply with all state regulations and requirements, including annual filings and fees. Failure to do so could result in losing the liability protections offered by an LLC.

This includes filing annual reports with the state, paying any applicable franchise taxes or fees, and keeping your book updated and compliant with federal regulations.

Some states may require additional registrations or filings for insurance agency LLCs, such as a Certificate of Authority, if you plan to conduct business in multiple states.

Be Assured of Your Insurance Agency’s Success with doola

If you have made up your mind about setting up an LLC for your insurance firm but don’t know where to start, then you’ve come to the right place.

We understand this process can often be overwhelming, especially if you’re not familiar with the legal requirements and paperwork involved. 

It’s totally natural to feel overwhelmed by all the red tape. But don’t worry, and let doola step in to do it all for you.

Our business formation services are specifically tailored for LLCs like yours. We will be with you through every step of the registration process, making it quick and hassle-free. 

Along with incorporating your business, we help you maintain accurate bookkeeping records, including tracking income and expenses, tax filings, payroll processing, invoicing, and more. 

With doola’s bookkeeping solutions specifically designed for insurance agencies, you can rest assured that all these tasks will be taken care of efficiently and accurately.