Starting a title company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful title company.
Importantly, a critical step in starting a title company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Title Company:
- Choose the Name for Your Title Company
- Develop Your Title Company Plan
- Choose the Legal Structure for Your Title Company
- Secure Startup Funding for Your Title Company (If Needed)
- Secure a Location for Your Business
- Register Your Title Company with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Title Company
- Buy or Lease the Right Title Company Equipment
- Develop Your Title Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Title Company
- Open for Business
1. Choose the Name for Your Title Company
The first step to starting your own title company is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own title company:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your title company.
2. Develop Your Title Company Plan
One of the most important steps in starting a title company is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
The following are the key components of a business plan:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your title company.
- Company Overview – this section tells the reader about the history of your title company and what type of title company you operate. For example, are you an independent title company, branch title office, main title company, national title company, or a fee title company?
- Industry Analysis – here you will document key information about the real estate title industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your title company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your title company make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Title Company
Next you need to choose a legal structure for your title company and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the title company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a title company together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a title company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a title company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your title company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Title Company (If Needed)
In developing your title company plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a title company to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a title company that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your title company, you’ll want to find an office space that is easily accessible and visible to potential customers. You’ll also want to make sure that the space is large enough to accommodate your team and office equipment.
The best way to find a location for your title company is to search for office spaces for rent online. There are many websites that offer this service, and you can usually find a variety of options to choose from. Be sure to compare prices and reviews before making a final decision.
6. Register Your Title Company with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your title company’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your title company to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
The business of the title company generally requires a license from the state in which it will operate. A trade name registration or fictitious business name registration may also be required. In addition, many states require surety bonds or other security to be in place before a license is granted. In addition to a state license, title insurance companies are typically required by their regulators to be members of the American Land Title Association (ALTA) and/or other state land title associations. Finally, some states may require specific types of businesses to obtain a sales tax or use tax permit and others may have licensing requirements for corporations.
10. Get Business Insurance for Your Title Company
The type of insurance you need to operate a title company depends on the type of business you are running.
Some business insurance policies you should consider for your title company include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Title Company Equipment
The first piece of equipment you need is a computer. You’ll need to use this to keep track of your clients, finances, and other important information.
You’ll also need a telephone and a fax machine. The telephone will be used for contacting clients and the fax machine will be used for sending and receiving documents.
Finally, you’ll need some office supplies and furniture such as a desk, chair, filing cabinet, and printer.
12. Develop Your Title Company Marketing Materials
Marketing materials will be required to attract and retain customers to your title company.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your title company. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional title company website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your title company.
13. Purchase and Setup the Software Needed to Run Your Title Company
You will need software to manage your title agency’s operations. One option is TitlePro, which is a title company software that can help you manage your business’ finances, title searches, and more.
You will also need a document management system, CAD program for drawing/mapping, and finance and accounting software.
14. Open for Business
You are now ready to open your title company. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Title Company FAQs
Is it hard to start a title company?
Some people may find it hard to start a title agency because of the amount of work involved, while others may find it easy because they have the necessary skills and industry knowledge.
How can I start a title company with no experience?
Starting a title insurance company with no experience can be difficult, but it is not impossible. There are a few things you can do to increase your chances of success:
- Research the industry and learn as much as you can about the process of title insurance.
- Find a mentor or someone who can help guide you through the process.
- Join an industry association and attend their events. This will allow you to network with other professionals in the industry.
- Start small and gradually grow your business. This will allow you to gain experience and learn from your mistakes.
What type of title company is most profitable?
The profitability of a title company largely depends on the specific type of title company and the market in which it operates. That said, there are a few general trends that can be observed.
For example, larger title insurance agencies tend to be more profitable than smaller ones, as they have more resources with which to operate. Title companies that specialize in certain services (such as real estate or mortgage closings) are also generally more profitable than those that offer a wider range of services. Finally, title companies that are well-established in their local markets tend to be more profitable than those that are newer or less well known.
How much does it cost to start a title company?
The cost of starting a title insurance agency will vary by state. In general, you can expect to pay anywhere from $1,000 to $10,000 to start a title company. This will cover filing fees and other expenses. Other startup costs for your new business may include fees to obtain insurance, advertising costs, office equipment, furniture, and software.
What are the ongoing expenses for a title company?
The ongoing expenses for a title company can include things like rent, employee salaries, and marketing costs.
The cost of title insurance is a common ongoing expense for a title company.
Title companies may also have to pay a fee to the Equal Credit Opportunity Act, which would depend on the size of their workforce. Title insurance expenses will vary from one state to another as well as by the type of properties being insured. In some states it is possible to receive reduced rates on title insurance premiums.
Title companies may have ongoing expenses associated with the use of new equipment or technology. For example it may be necessary to purchase special machines or software. It's also common for a real estate practice to have ongoing expenses related to its website, including hosting fees and web design costs.
How does a title company make money?
One way a title company makes money is by charging for their services. For example, a title company may charge a fee for providing a title search or issuing a title insurance policy. This fee may be based on the amount paid for the property, the number of parties involved in the transaction or some other reasonable standard. A title company can also make money by taking a percentage interest in real estate transactions.
Is owning a title company profitable?
Owning a title company can be profitable. One reason is that there is a large industry of real estate and the demand for title insurance only continues to grow. In addition, a title company typically has low overhead costs and can offer both agents and consumers competitive rates. Finally, a title company also provides an essential service to the community.
Why do title companies fail?
Here are some reasons title companies fail:
- Lack of capitalization - A title company is a business, and like any other business, it requires adequate funding to get started and to maintain operations. Title companies that do not have the necessary capitalization tend to fail.
- Poor management - If the title company is not well managed, it is likely to experience financial difficulties and may eventually fail.
- Bad decisions - Making poor decisions can lead to a company's downfall. This can be anything from making bad investments to hiring the wrong employees.
- Not keeping up with modern technology - The title industry is constantly evolving, and if a company does not keep up with the latest advances, it will likely fall behind its competitors and fail.
- Not diversifying - Title companies that do not have a balanced portfolio of services and products tend to fail.
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