Back in January, I talked about some of the things that I am most excited about discussing with my clients in 2017, among them was “Captive Insurance Companies” and how businesses can utilize these structures to efficiently reduce their risk.
Q. What’s New in 2017 for Captive Insurance Companies?
A. First, let’s understand what a “Captive Insurance Company” is. “Captive Insurance Companies” are private insurance entities owned by related parties, “owners of business and or businesses,” setup to self-insure and or reinsure the risks of their businesses (see attached link below from IRS on Section 831b Micro-Captive Transactions).
- Benefits of these structures include;
1. “New 2017 Limit” – Fund up to $2,200,000 in insurance premium directly and or indirectly tax free annually (this is a significant increase from prior year by $1,000,000 “2016 limit was $1,200,000”).
2. Create valuable reserves for your business to protect against possible business risk claims for the future.
3. Invest funds in “Captive Insurance Company” (similar to an insurance company) to increase reserve funds for future use.
It should be noted that the investment income earned in “Captive Insurance Companies” will be subject to taxes. There are certain qualifications required to qualify for these types of structures and they are not appropriate for all businesses. If this is something of interest to you, please feel free to contact my office at your earliest convenience to setup an appointment ([email protected]).
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