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Create business entity

Pick company name:

To begin the initial process of creating your business, you will need to first come up with a name. What is the name you always wished you could brag about to your friends and family? Is it your last name or first name or possibly something completely different? You will need a professional name for the next step which is creating your business entity.

Choose entity type:

After picking your name, you will now need to pick an entity which means a form of incorporation for your company. Some of the most common forms are Limited Liability Companies (LLC) and corporations. In total, there a four groups of business entities you can choose from: 

    1. Limited liability companies
    2. Corporations
    3. Partnerships
    4. Sole proprietorships

**Before selecting an entity, it is very important that you speak to an accountant first to make sure you understand all the requirements for your state of residence and that you select the entity that fits your goals best**

A limited liability company (LLC) is a growing form of business entity. The owners are called members and the people who run them are called managers. There usually are no restrictions on the number of owners for an LLC. They also provide pass through tax treatment which means the business does not pay income tax but instead the income is allocated to the members who then pay taxes on their share.

A corporation is one of the oldest forms of legal entities. They are most preferred for companies that eventually plan to be publicly traded. Corporations are subject to double taxation where the entity itself pays taxes on its income, and then the owners pay income taxes on the dividends which they receive from the corporation.

A partnership can be an informal business entity where there are no filing requirements and very few maintenance requirements. As for taxes, partnerships are not generally recognized as legal entities for tax purposes, so profits and losses are allocated to the partners individually as a pass-through. Something to be mindful of when exploring partnerships, is that any partner in the partnership can bind all the other partners so that each partner is individually liable for each obligation of the entire partnership.

A sole proprietorship is a one person entity, it is not incorporated, avoids double taxation, and does not provide any liability protection resulting in all the assets of the owner being exposed. There are no protections against the unfortunate circumstance of getting sued.  Many new agents tend to start as a sole proprietor. If you do change your mind and want to select a different entity, it is possible but there will be some costs and paperwork involved.

Obtain an EIN:

You can obtain an Employer Identification number (EIN) from the IRS. this is basically the social security number for your business.  To apply for one visit the IRS website.

Open a company bank account:

You are not able to open a business bank account without an EIN, so make sure to complete that first. Having a separate bank account for your business helps you organize all your finances in one place with copies of statements all ready in one place. It will also be crucial when it comes time to filing for taxes, you don’t want to be mixing personal and business charges together. A few banks you can use are:

    • Mercury is built for startups to make the journey easier. Mercury contains FDIC-insured bank accounts that come with API access, virtual cards, and team management.
    • Chase banking for business provides options for small to large businesses with card variation for your needs. You are also able to schedule a meeting with a business specialist that can help answer all your questions.
    • BlueVine helps startups by not having any monthly NSF fees with unlimited transactions and over 38,000 ATMs with no transaction fees. They aim for a flexible design with dedicated support.

Get E&O Insurance

Errors and Omission Insurance (E&O Insurance) is a form of professional liability insurance that will protect you from lawsuits that claim you made a mistake with the services you provided to your clients.

It is meant to cover:

  1. Errors in service given 
  2. Omissions 
  3. Negligence 
  4. Misrepresentation 
  5. Violation of good faith and fair dealing 
  6. Inaccurate advice

It will be able to cover attorney fees, court costs (reserving courtroom), administrative costs (paying office managers and court reporters), settlements and judgements.

The cost of E&O insurance varies based on the amount your insurer will pay for a single claim or all claims, or in other words, your coverage limit. You should be aware the cost of the items listed in (c) above can quickly go through the roof so imagine the worst case scenario and pick the figure you can afford. For example, a Coverage limit of $500k has a $441 annual cost and a coverage of $1mil is approximately $779. The higher your deductible or amount you pay towards a claim, the lower the price of your policy. 

**Be aware that E&O insurance varies from company to company and are created to reflect certain business environments and the risks associated with them**

A few E&O insurance providers you can choose from include:

  • NAPA E&O provides affordable E&O insurance for agents and agencies. They have different insurance prices for agents licensed under 2 years, licensed 2 or more years, or Medicare only E&O insurance. 
  • Nationwide understands that being human comes with accidents and that liability occurs especially when it comes to a business whether it is bodily injury, legal fees, your employees, and subcontractors. They will provide you a quote given the type of business you have. 
  • State Farm knows an innocent error on your part can bring a lawsuit back to you so they provide a range of coverage depending on your type of business. You can contact a nearby agent for quotes based on the type of coverage you want.
  • Hiscox wants you protected and provides E&O insurance designed to protect employees and employers against claims of negligence. They clearly state what their policy does not cover like false advertising, patents and trade secrets, and more you can find on their website.

Get contracted with insurance carriers to be able to sell those products

In the insurance business the hardest part of becoming contracted is getting credentialed with insurance companies. Many of the insurance companies take 30 to 180 days to get credentialed.

First, you will want to get your National Producer Number (NPN) number which is a Health Insurance Portability and Accountability Act (HIPAA) standard. It is a unique identification number for health providers assigned through their National Association of Insurance Commissioner’s (NAIC’s) licensing application process. It is used to track individuals and business entities offering health insurance products and protects them from having their social security displayed on the National Insurance Producer Registry, so you definitely need one. 

There are two types of National Provider Identifier (NPI) numbers, the first being Individual (Type 1) and the second being Organizational (Type 2). It is recommended you get your individual NPI number regardless of if you go into individual practice or work for a company because this number will follow you throughout your entire career and may come in handy in the future. To apply for your own NPI number visit the National Plan & Provider Enumeration System website and follow the prompts.

An NPN number is assigned to you once you have completed getting your broker license which is automatically connected to a unique NPN which is easily attained. NPN’s are useful for validating the legitimacy of a potential business partner or agency in the industry and getting contracted with different carriers. You will need an NPN number to:

    1. Get contracted with carriers because they will want to look up your identity
    2. Writing your applications because you need to prove your identity and qualifications

Join an FMO (Optional):

Once you are licensed and preparing to start selling, you may want to consider joining a Field Marketing Organization (FMO). FMO’s are top-level organizations licensed to sell health insurance products throughout the states. They are intended to help you through your sales process while you are in the field. FMOs make their money through contracts with insurance companies where they promise to make them however many millions and in exchange an override and commission is given to the agents and agency in return. A few you can choose from are: 

  • Applied General Agency (AGA) provides independent agents and agencies with competitive insurance marketing, support and resources. They will help with custom marketing plans to increase qualified leads. They provide technology you need to enroll clients from anywhere with unlimited training to become a top-selling agent.
  • Ritter Insurance Marketing (RitterIM) is a national FMO that provides you the back-office support and technology you need. Their technology lets you quote more than 80 insurance carriers’ different plans for your agents based on their location with online contracting capabilities. Ritter will help you grow your business through recruiting leads and learning from those more experienced in the industry. 
  • National Contracting Center (NCC) is a Medicare-focused FMO that aims to help independent agents and agencies grow their senior health product sales. They provide a dedicated support staff for one-on-one support,  consistent, quality leads, and sales and compliance training with direct assistance through their agent support team. 
  • Agent Pipeline provides insurance products and services to meet your specific needs. You can choose from over 200 insurance carriers while utilizing their quick online quoting and enrollment platforms for Medicare Supplements, Medicare Advantage, ACA, and more. With the use of their marketing specialists, you can develop your own unique marketing plan.

Get AHIP Certified to sell MA and PDP:

America’s Health Insurance Plans (AHIP) certification is needed to sell Medicare Advantage (MA) plans and Prescription Drug Plans (PDPs). By getting your AHIP you will have proof that you completed a series of AHIP Medicare training courses that will cover how to sell plans in ways that are compliant with  Centers for Medicare & Medicaid Services (CMS) regulations which can change yearly The certification also gives you skills that will help you grow your business and take care of your customers simultaneously. 

AHIP training teaches you:

  1.  Who is eligible for Medicare and Medicare fee-for-service plans and what it covers and who is eligible 
  2. Medicare advantage and Part D plans  
  3. Nondiscrimination
  4. How to enroll customers in Medicare plan

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