What Is an Agency? Definition, Examples, and the Best Options

Step 1: Draw A Business Plan

The first step for anyone looking to start a new business is to draw a robust business plan. A well-made business plan is a blueprint to success.

You can use a business model canvas to create your plan. This document can help you establish your commitments to your stakeholders, and identify where your prospects are, where your growth opportunities lie, and where your revenue stream is.

A well-made business plan can also help you set your goals and values, identify risks, and determine the resources you need.

While your business plan can serve as a roadmap, it may be adjusted over time.

At the bare minimum, your plan should cover these points:

The organizational structure.
Who your target customers are, how you plan on getting them, and the insurance products your business will provide.
Identify who your suppliers are.
Who your immediate customers are.
The budget that will cover the initial start-up costs.
The cash-flow projections.

Step 2: Pick Your Business Structure

The business structure you opt to go with will determine the level of personal liability you’ll take on. So, When it comes to agencies, some of the business structures you can choose as a model are:

Corporation
Sole proprietorship
Partnership
S corporation
Limited liability company (LLC)

Every business structure has its own set of advantages and drawbacks. For example, while simple to establish, going with a sole proprietorship model will mean that you may need to use your personal assets to settle any business debts that you may face. It also means that if someone sues you, your personal assets will also be at risk.

Similarly, corporations and limited liability coverage can offer a financial buffer between you and your business. But they also tend to be more expensive and complex to manage.

Step 3: Finalize and Register Your Agency’s Name

You might have already picked a name for your insurance agency. But you still have time to change it. While choosing a name, you will need to consider a few things like:

Is the name easy to pronounce and spell?
Does it convey your agency’s values?
Is it easy to search online?
Does it meet your state’s requirements?

Note: Most states prohibit the use of certain words for businesses to use. Check with your Secretary of States’ department to learn what words are restricted.

Once you have finalized the name of your agency, you will need to register it with the state’s government. So, a minimal registration fee might be charged.

Step 4: Get Your Tax ID Number

The Internal Revenue Service (IRS) has mandated all business corporations and partnerships to use a federal employer identification number (FEIN) when filing their taxes. So, if you want to open a bank account or create a business credit card, you will need to acquire this number.

Note: If your business is a sole proprietor or a single-member LLC, you can use your social security number in its place.

Step 5: Register Your Agency with Your State

After acquiring your tax ID, you will need to contact the state insurance commissioner’s office. You will need to register as a “resident business entity.”

Your state will charge a registration fee and provide a checklist to ensure that you’re well-versed on all state requirements.

Step 6: Get Your Business Documents

Even if you have an insurance agent license, you will need a general business permit to operate in your state. The exact requirements and fees can vary based on a number of factors like the location, the business activities, and the set government rules.

Note: You should check with your state’s local agencies to ensure that you’re complying with the set regulations.

Step 7: Get Insurance to Protect Your Business

Just because you have an insurance business doesn’t mean that you’ll automatically be covered. Based on the structure and assets of your agency, it will need specific coverage to keep it financially protected.

Some of the most essential insurance coverage to consider getting for your insurance agency are the following:

General liability insurance will provide your business with coverage for a wide variety of situations. For example, if one of your clients slips on a wet surface and injures themselves while in your office, this can help pay for their medical fees. This coverage can be bundled with commercial property insurance in a business owners policy.
Errors and omissions coverage is something that every insurance agency needs before they’re allowed to write policies. It protects insurance buyers against any form of error that you or your staff may make.
Workers compensation insurance will pay off any claims that one of your employees makes against the company. For example, if one of your staff trips on a carpet and ends up spilling hot coffee all over herself resulting in serious burns, this coverage will pay a portion of her lost wages and medical expenses. This coverage is mandated in almost all states and will need to be implemented even if you only employ people who work part-time.