And how to avoid them
So, you’ve decided that you’re finally ready to incorporate your agency. Your next question should be: What pitfalls should I avoid in order to ensure smooth sailing?
Thankfully, we’re here to help.
In this post, we’ll take a look at the top five mistakes agencies make when incorporating and how you can avoid them. Let’s get to it.
1. Not incorporating
The first mistake many agencies make is not incorporating in the first place. Maybe they think they’re too small, or don’t meet certain requirements—this is simply not true! No matter if you’re one person or one hundred, separating—and thereby protecting—your personal assets from your business assets can mean major tax benefits for your agency. So, how can you go about starting the incorporation process? This will depend on whether you’re starting out as a sole proprietor or LLC. Which brings us to our next mistake…
2. Not choosing the right business entity type
Once you’ve made the decision to incorporate, it’s important that you choose the most advantageous business entity type. After all, if you don’t, you could be paying higher taxes. Here at Club Capital, we recommend first incorporating by way of a C Corporation, and then requesting an S election with the IRS. This way, as the owner of the corporation, you can take advantage of the reduced tax burden.
3. Not acquiring the proper local business licenses
Remember, after you incorporate, it doesn’t mean the job is done. You’ll still need to acquire the proper local business licenses depending on where you’re located. Ensure you’re in compliance with the guidelines of your local municipality and business ordinances so that you can avoid paying back taxes, fines, or other penalties.
Recommended reading: What Insurance Agents Need to Know About Their S-Corp Structure
4. Not filing all mandatory paperwork
We get it—no one likes paperwork (okay, maybe your CPA)—but that doesn’t mean you can simply ignore it and it will go away! Make sure your agency stays in good standing by filing all Local, State, and Federal paperwork (think changes in corporate officers, resident agents, tax liabilities, updates to ownership, etc.) and taxes in a timely manner. This way, you’ll ensure you’re in compliance, no matter where you’re at in the incorporation process.
5. Not getting expert help
Guess what? The good news is you don’t have to do all of this alone. Thankfully, there are experts out there who already have all the know-how and experience you need in order to make sure your agency’s incorporation process is efficient, effective, and pain-free.
Here at Club Capital, we help insurance agents better manage their agency's finances with everything from monthly accounting to CFO and tax services. Not only can we help you plan and prepare your taxes, we can also review your agency’s financials, maximize credits to lower your tax liability, and prepare and submit tax returns with the corresponding Local, State, and Federal agencies. It’s like having an in-house CFO—without having to pay a CFO’s salary.
Ready to Get Started?
If you’re ready to start incorporating your agency, we’re here to help. We can start by taking on all the paperwork, implementing financial automation, providing insights into your financial data to empower better business decisions, and grow together from there. This will allow you to better focus on what’s core to your business, grow and develop your team, and—ultimately—increase your bottom line. Does that sound like a plan? Schedule a demo today!