The Definitive Guide To Captive Insurance Companies: What Every Small Business Owner Needs To Know About Creating And Implementing A Captive($16.46Value)

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The Definitive Guide to Captive Insurance Companies: What Every Small Business Owner Needs To Know About Creating and Implementing a Captive America's top corporate estate, tax and asset protection attorney provides readers with true insight on multiple key sophisticated planning techniques for small business owners implementing captive insurance companies. The Definitive Guide to Captive Insurance Companies will provide readers with the ability to: - Reduce income taxation, - Increase cashflow, - Self-insure, - Protect personal and business assets, and - Enhance estate planning. The Definitive Guide to Captive Insurance Companies What Every Small Business Owner Needs to Know About Creating and Implementing a Captive By Peter J. Strauss AuthorHouse Copyright © 2011 Peter J. Strauss, J.D., LL.M. All right reserved. ISBN: 978-1-4670-3866-9 Contents MEET THE AUTHOR.......................................................................................................................viiACKNOWLEDGEMENTS......................................................................................................................ixPREFACE...............................................................................................................................xi1 FUNDAMENTAL PRINCIPLES: WHAT YOU NEED TO KNOW ABOUT CAPTIVE INSURANCE...............................................................12 HOW TO MINIMIZE YOUR ESTATE AND INCOME TAXES WITH CAPTIVE INSURANCE.................................................................233 PUTTING THE CAPTIVE INSURANCE COMPANY TO WORK FOR YOU: HOW TO SET UP A CAPTIVE AND START INSURING YOUR BUSINESS.....................444 WHAT YOU NEED TO KNOW ABOUT MANAGING YOUR CAPTIVE INSURANCE COMPANY: TAX AND REGULATORY REQUIREMENTS................................675 PROTECTING YOUR ASSETS FROM LAWSUITS WITH A CAPTIVE INSURANCE COMPANY...............................................................77APPENDIX: CAPTIVE INSURANCE CASES AND RULINGS.........................................................................................90 Chapter One FUNDAMENTAL PRINCIPLES: WHAT YOU NEED TO KNOW ABOUT CAPTIVE INSURANCE Life is filled with risks. Every day, you take risks in your business. Some of these risks are calculated on your part; after all, you must take on these risks in order to make a profit in your business. Other risks may not be so well known to you, or they may not be at the forefront of your mind on a regular basis. As much as you may carry insurance on the truck used to make deliveries in your business, you may not carry similar insurance on the computer used to track your deliveries. There may even be some risks which you know about but which are simply too expensive for you to insure. Unfortunately, unless you pay an insurance coverage a premium to insure your business against all of these risks, there is no tax benefit to self-insurance. According to the American Institute of Certified Public Accountants (AICPA), most businesses unknowingly self-insure a great part of their risks from daily business activities. This same AICPA report says: Self-insurance, whether funded out of company reserves or personal after-tax savings is not tax-deductible. To compound the problem, smaller deductibles are expensive and not tax-beneficial. The solution, according to this AICPA report, is a captive insurance company. Properly structured, "self-insurance through a captive structure can create substantial tax deductions, resulting in tremendous tax savings." Captive insurance produces material tax savings that help you to save real dollars in your business. Furthermore, captive insurance helps businesses to combat inadequate insurance and excessively high premiums. Yet, most business owners have no idea what captive insurance is, much less how to use it to their advantage. Captive insurance is a strategy whereby your business purchases insurance coverage from an insurance company that you own and control, i.e., a "captive" insurance company. The premiums paid by your business are tax deductible. Meanwhile, the premiums that your captive collects are tax-free. You read that correctly: The premiums collected by your captive insurance company are tax-free. Suppose your business pays $1 million in premiums to your captive insurance company every year. Assume further that your combined federal and state income tax rate is 50%. Your business would deduct $1 million from its taxable income, saving you $500,000 each year . Furthermore, that $1 million would be received free of income tax each year inside your captive insurance company. You would pay less in taxes and have more money in the bank. In this first chapter, I will start you out with a brief history of captive insurance. I will share with you how captive insurance came to evolve into an insurance strategy with tremendous tax savings potential. I will then provide you with an overview of the