What is an agent?
An agent, in legal terminology, is a person who has been legally empowered to act on behalf of another person or entity. An agent may be hired to represent a client in negotiations and other dealings with third parties. The agent may have decision-making authority.
Two common types of agents are attorneys, who represent their clients in legal matters, and stock brokers, who are hired by investors to make investment decisions for them.
The person represented by the agent in these scenarios is called the principal. In finance, it refers to a fiduciary relationship, in which an agent is authorized to transact on behalf of the client and in their best interest.
- An agent is authorized to act on behalf of another person, such as a lawyer or a stockbroker.
- People hire agents to perform tasks that they lack the time or experience to do themselves.
- A universal agent has broad authority to act on behalf of another, but a general agent or special agent has more limited and specific powers.
- Agency out of necessity is when an agent is appointed to act on behalf of a client who is physically or mentally incapable of making a decision.
- Most agent jobs require a license and registration with the appropriate state authorities.
Understand an agent
An agent is anyone who is given permission to act on behalf of an individual and can do so in a variety of capacities. This could include selling a home, executing a will, managing a sport career, managing an acting career, being a business representative, etc.
Agents have experience in a specific industry and are more knowledgeable about the ins and outs of that industry than the average person. For example, if you started to gain attention as a musician, you would hire a music agent to guide you through securing a record deal, signing record deals, and organizing your tour schedule.
Since you would have no experience with the recording industry, you would need an agent to look out for your best interests and take care of much of the work that you might not otherwise be able to complete on your own. This would also free up your time so you can focus on making music.
Types of agents
There are agents of all kinds depending on their role and the industry in which they operate. In general, there are three types of agents: universal agents, general agents, and special agents.
Universal’s agents have a broad mandate to act on behalf of their clients. Often these agents have been granted a power of attorney for a client, giving them considerable authority to represent a client in legal proceedings. They may also be authorized to conduct financial transactions on behalf of their clients.
General agents are hired to represent their clients in specific types of transactions or procedures for a specified period of time. They have broad authority to act but in a limited sphere. A talent agent for an actor would fall into this category.
Practicing as an agent in a specific industry without the proper license or registration can result in fines or you are prohibited from acting as an agent in that industry in the future. Before working as an agent, make sure you have obtained the proper license, certification, and registration.
Special agents are authorized to carry out a single transaction or a series of transactions within a limited period. This is the type of agent that most people use from time to time. A real estate agent, a securities agent, an insurance agent, and a travel agent are all special agents.
People hire agents to perform tasks that they lack the time or experience to do themselves. Investors hire brokers to act as intermediaries between them and the stock market. Athletes and actors hire agents to negotiate contracts on their behalf because agents are often more familiar with industry standards and have a better idea of how to position their clients.
Most commonly, prospective homeowners use brokers as intermediaries, relying on the professional’s greater negotiating skills.
Companies often hire agents to represent them in a particular business or negotiation, relying on superior skills, contacts, or background information of agents to complete agreements.
There is also the “agency of necessity” where an agent is appointed to act on behalf of a client who is physically or mentally incapable of making a decision. This is not always a disability case. Business owners, for example, can appoint agents to handle unexpected problems that occur in their absence. For example, if a CEO was on a flight and couldn’t be reached, but an emergency business decision needed to be made, the agency might be called on out of necessity.
The agency out of necessity runs most often in times of emergency or urgency when the main party is not available to make a decision. In these situations, the courts would recognize a third party making the decision if the primary party empowers that party to do so. The third party would be responsible for acting in the best interest of the principal party.
Estate planning requires a lot of tax knowledge. Having an agent guide you through the process will be beneficial in ensuring that your beneficiaries receive the majority of their inheritance.
Estate planning often sees the agency out of necessity. Although a person may have created a will that describes how their estate should be disbursed at the time of their death, there could be situations where the person became incapacitated before the necessary adjustments were made to the will. Here, the agency by necessity could be used by a trusted party.
What is an enrolled agent?
An enrolled agent is one who represents taxpayers before the Internal Revenue Service (IRS). To become an enrolled agent, you need to pass an IRS test that covers individual and business tax returns or by experience of having been a former IRS employee. Enrolled agents can represent any type of taxpayer on any tax matter before any IRS tax department.
What is a registered agent?
A registered agent is a person who is authorized to accept legal documents on behalf of a limited liability company (LLC). All LLCs require a registered agent and are legally authorized to accept tax documents, legal documents, government documents, compliance documents, and any other documents related to the LLC. A registered agent of an LLC is known to be a “process service agent.” If an LLC does not have a registered agent, it can be fined by the state, not allowed to sue, denied financing, and not allowed to expand out of state.
How to become a real estate agent?
To become a real estate agent, you must obtain a real estate agent license. There are some qualifications for this and they may vary from state to state. Generally, a person must be 18 years of age, be a legal resident of the US, complete the required re-license education, and pass the real estate exam. Individuals can enroll in license renewal courses prior to taking the real estate exam.
How to become an insurance agent?
The first step in becoming an insurance agent is deciding what type of insurance agent you want to be, since the type depends on the path to becoming one. You can choose to be a captive insurance agent or an independent insurance agent. From there, you will need to decide which insurance products you would like to sell to clients. The next step is to obtain a license in your state. The products you decide you would like to sell will depend on the type of license you will need. You will take your licensing exam and from there you will need to submit a background check and license application to your state licensing department. Once this is complete, you will need to find an insurance company to work with.
How to become a sports agent?
To become a sports agent, you will need to obtain a sports license and register with the state. Not all states require this. The sport or league you want to join will also require a certification. Typically, a bachelor’s degree is required before becoming a sports agent, and advanced degrees, such as law, help you become one so that you can understand the legal language of the client contracts you manage. Once you’ve been certified and licensed, you’ll need to join a sports agency and start building a client base from there.
The bottom line
An agent is any person who has been entrusted to act on behalf of another person. People often turn to an agent when they need someone with more experience or when they don’t have time to complete a task.
Agents are commonly used in the finance, law, real estate, insurance, acting, and music industries, but can be found in almost any situation where advanced subject knowledge is needed. Agents can save people a lot of time, money, and headaches when performing important tasks.