Category Archives:Blog

Avoid Mistakes Small Businesses Make: Corporation, LLC Accounting and Payroll

Congratulations! You have either just recently started your small business, or you are in the final stages of convincing yourself that it is time to take the plunge. Whether you have done this to take control of your future, or you were an independent contractor who decided that there were additional tax savings to be had, the most important this is that you have done it.

Now, the key is to not make the key mistake of not properly filing the proper tax returns, and to make the necessary tax payments. After all, this is the reason you hear advertisements on the TV and radio asking if you owe more than $100,000 to either the IRS or the state. Do NOT let this happen to you. Read on to learn more about managing your small business accounting and why you may want to hire a Business Manager.

Regularly Scheduled Payroll

If you are the only employee in your small business, how and when you pay yourself is really up to you; however, if you have employees, they will expect to be paid on a regularly scheduled basis. What goes along with paying employees is the handling of their appropriate deductions and withholding amounts, as well as the appropriate employer matches to Social Security and Medicare taxes. Failure to appropriately handle these funds has caused long lasting tax problems for small and large business owners.

Payroll Tax Payment and Reporting

Regardless of how often you pay yourself and/or your employees, the state and federal government demand that reports get filed, along with the appropriate tax payments on a strict schedule. Failure to file these reports and make timely payments can result in severe penalties, which unfortunately revert back to the owner of the business. Learn early on what these amounts are, and when these reports are due, and you will be thankful you did.

Small Business Accounting

Odds are that unless you are an accountant, you did not start your business to spend all of your time bookkeeping. While your primary focus is that of either developing your products and/or services, or marketing them, failure to spend the requisite amount of time taking care of the business accounting and bookkeeping can negate the potential tax savings that can come your way, simply because you own a small business.

Small Business Software

Today, small business software is everywhere. I have even seen companies giving it away on the internet. There are a number of “off the shelf” Accounting programs on the market today, but quite frankly, many small business owners are finding them too complex to fully utilize without a significant amount of accounting knowledge to start with. If you have the accounting knowledge, or are willing to put in the necessary amount of time to acquire it, the packages are fully capable of doing everything you need them to do. The question to ask yourself is “How much time do I really want to spend on this?” and “What is this amount of time costing me in lost sales?”

Costs and Efficiency

It doesn ́t matter if you are an Independent Contractor Physician, or a Salesman who has decided to break away from “Corporate America” and go it alone, every small business owner knows that you get to keep more money if you can figure out how to do more with less expense. Maximizing your efficiency is something a Business Manager would be able to help you with. You get to spend your time doing what makes you and your business manager is solely focused on doing the things that you don ́t make you money, i.e., payroll, tax reporting and accounts payable, among other things.

Don’t let yourself get caught in the tax trap of missing filing deadlines, and not making payroll tax payments at the appropriate time. Take the steps necessary early when you are still building your business, rather than having to deal with tax liens and legal bills when your business is successful.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.

We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions or call us at: 1-800-517-0CFO (1-800-517-0236)

For a Limited Time, get FREE Incorporation with our Accounting/Payroll Services! Submit your e-mail for more information, or schedule a quick phone call with me here.

Why Your LLC, Corp, PA, PC May Not Be Valid

You probably formed your company, whether it is a LLC / Corp / PA or PC, for a variety of reasons. Some of these reasons may include protecting your personal assets, defining ownership if you have partners, or simply so you had a separate set of accounting records in the event you have employees or various retirement plans. How would you feel if someone were to tell you that this did not do the job you wanted, only because your entity was either not set up correctly in the first place, or that you have failed to properly maintain your entity? As an LLC / Corp / PA or PC, you have ongoing obligations that must be met in order to maintain your “corporate veil” of protection. Failure to do so will allow an attorney to “pierce the corporate veil” which can open you up to personal liability, and make your personal assets fair game to civil judgment. Read on to protect yourself from making this mistake.

Bylaws

The bylaws contain the most fundamental principles and rules regarding the nature of the corporation, and are generally the governing document. In simplistic terms, corporate bylaws define the Name, Objective, Members, Officers, Meetings, Executive board, Committees, and ability to make Amendments. Your corporation does not formally exist until bylaws have been adopted, unless otherwise provided by law.

Operating Agreements

LLC ́s are very flexible in nature and the operating agreement defines each member or manager’s rights, powers and entitlements. This includes capital accounts, membership interest, distributions of profit and allocated tax responsibility, just to name a few. This is an agreement agree to by the company members that contains provisions for critical items and rules that run the company. Operating agreements can be amended at anytime by the company members or managers; however, one is necessary to prove that any given member is indeed separate from the entity itself. Similar to corporate bylaws, the LLC does not formally exist until an operating agreement has been adopted by the members.

Fictitious Name Filing

This filing states that an entity other than a person will be doing business in a given county. While this may seem mundane, this is a requirement, and must be filed in a specific newspaper in the county in which you will be doing business. In addition, a similar filing must be made when you choose to close your business. Failure to file for a fictitious name can result in local fines and restrictions from obtaining necessary permits and licenses.

Board Meetings

If you want the protection provided by being a corporation, you actually have to act like a corporation. This means that you must vote on a board of directors, and actually document that you had meetings, what was discussed, and what you decided to act on. This is one of the first items an attorney will ask for when trying to piece the “corporate veil”. Make certain you do this on a regular basis, or get some assistance to make sure your board meeting minutes are produced, and kept in your corporate compliance book.

Annual Reports

Your corporate annual report is due the beginning of each year, and the due date varies from state to state. This form requires you to provide information on corporate officers and your registered agent. Failure to complete this form, and pay your annual renewal fee on a timely basis will result in your company being “administratively dissolved”. If you have any corporate debts, and you are administratively dissolved, you just became personally liable for those obligations, as your company no longer exists.

You spent a lot of time and effort to get your business started and making money. We all understand that you can get caught up in the day to day operations of your business, and lose track of some of the things that are required, but, do not generate sales for your business. So before you let too much time pass, and your company no longer exists, give us a call. We will work with you to bring your filings up to date, and make certain they are current on a going forward basis.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.

We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions or call us at: 1 (800) 517-0CFO 1 (800) 517-0236

Why All Small Businesses Need A Business Manager: Time Management, Reduce Costs & Protect Assets

As a small business owner, regardless of the product or service you offer, your time is the most precious commodity you have. Since you only have a limited number of hours in each day, managing the amount of time you spend on various projects is critical. You want to make certain that these hours are as productive as possible, meaning they generate the greatest level of income possible. What you do not want to do is to spend hundreds of hours during the year on bookkeeping, taxes and keeping up with your corporate filings when you can have an expert take care of this for you.

If you are interested in learning how to leverage a business manager for improved small business time management, to reduce small business costs, and to protect your personal assets, read on.

Time Management

According to the Internal Revenue Service, you can anticipate spending over one hundred hours doing the recordkeeping for your company each year. In addition, you can expect to spend an additional 30 hours learning what forms you need to file, another 65 hours actually preparing the forms, and another 5 hours reviewing and actually filing your returns.

What is your time worth?

Since you are not able to increase the number of hours in each day, this is most likely not the best use of your time. A business manager is already knowledgeable about small business accounting, and will be able to do this amount of work in a fraction of the time, for a fraction of the cost. Don ́t make a costly management mistake. You are not a bookkeeper or accountant, so why should you try to become one. Let someone else do what you have to do, so you can spend your time on what you love to do.

Reduced Costs

Just like any other small business owner, you are looking to reduce costs anywhere you can. Before you start looking at hiring an internal bookkeeper and tax accountant, take a look at a business management company.

They can assist you in streamlining various portions of your business and will cost you much less than you would have ever thought. In addition, you will receive the expertise of a professional, for what it would cost you to have a part time bookkeeper. Remember, in the end, it really is about what you get to keep.

Your business manager is able to keep you informed about various filing deadlines, as well as giving you suggestions for managing and even reducing your various office expenses. Don ́t go it alone, have a partner who is looking to you as a client for the long term, not just a part time job until something better comes along.

Asset Protection

Do you remember the day you started your company? Not the day you opened for business, but the day you filed your corporation or LLC. You may have formed your corporation online, and went to the IRS website to get your EIN Number, but did you do everything you needed to do to actually BE a corporation? If you incorporate online, you use a document filing service that will fill out the forms you tell them, but they will not let you know what else you need to do.

For example, does your LLC have an operating agreement? If not, your LLC is not valid. Document filing services will not remind you that you have ongoing filing requirements. Not fulfilling these requirements means that you are can lose your status as a corporation, which can open you up to personal liability, and subject your personal assets to civil judgment along with filing penalties and interest. Your business manager or corporation service company can make sure all of your filings are complete and on time. They can also make suggestions that can reduce your tax liability.

You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time. Why? For one thing, it is a common — and disastrous misconception that an outside accounting firm hired primarily to do the taxes will keep watch over the business. In reality, that is the job of the chief financial officer, one of the many hats an entrepreneur has to wear until a real one is hired. In the mean time there are professionals who specialize in working with businesses just like yours. They know what the requirements are, and can help you satisfy them all, while not costing you an arm and a leg. Small businesses are the engine that makes this country great, so spend your time and money wisely. Ask a professional for assistance with the aspects of your business that do not make you money, so you can focus on what does.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant.

We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service we are here to help you with the part of the business that you have to do so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Contact Us Today!

Plug and Play for Doctors: Forming a Corporation, PA, PC, Or LLC

Now that you have completed your Internship and Residency, you are now an independent contractor physician, and about to make more money than you have ever made before. The next question in your mind is; “How do I keep what I make, and not pay out everything I make in taxes?”

To avoid the painful consequence and get all of the benefits, here are 5 things that must be done when forming your Corporation.

• Why Incorporate – Incorporating shields you from some liability by providing you with a corporate veil. It also provides you with the ability to pay certain expenses on a pre-tax basis, while also allowing you the opportunity to fund a variety of retirement plan vehicles, thus reducing your taxable income

• Form a Corporation – Forming your corporation is done in your state, and requires the filing of Articles of Incorporation with the Secretary of State. This can be done yourself, or you can hire a physician business manager to work with you.

• Apply for an EIN Number – Your EIN Number is the social security number for your business and is obtained from the Internal Revenue Service. It is necessary for establishing any bank accounts and retirement accounts, and will also be needed for your payroll taxes and annual corporate tax return.

• Become a Subchapter “S” Corporation –The amount of money you pay in income and payroll taxes is dependent on how you declare your income. By filing your “S” election form with the IRS, you are saying that your corporation will not pay income taxes, but that the profits of your corporation will be reflected as income on your personal tax return. Failure to file this form in a timely manner means that your corporation will pay taxes on its income, and you will then pay personal income taxes on this same income. The dreaded “double taxation”.

• Properly maintain your corporate records – Most people go take the steps listed in the last 3 items, and stop there. After your corporation has been filed, you then must hold an Initial Meeting of the Board of Directors, and perhaps file a fictitious name announcement if it applies in your situation.

After you have done all of this to make your corporation effective, please do not forget to do the following on a regular basis: File your Annual report, file quarterly payroll tax returns, hold regular board of director meetings and file your annual corporate tax return.

Selecting the right type of structure for your business is only the first step. Making sure you take the necessary steps to follow through and get everything done correctly the first time is paramount. So take your time, don ́t make any hasty decisions, and by all means, if you are going to hire someone to assist you along the way, use these 5 steps to help you find the partner that you can trust to be there to assist you after you pay the filing fees.


My Professional CFO, LLC, is a professional services firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant.

We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions!

How to Reduce Self Employment Taxes & Increase Retirement Savings as an Independent Contractor Physician

As an independent contractor physician, you have spent countless hours in the classroom and clinical training, and have finally reached the point at which you are finally reaping the financial rewards for all of your hard work, only to find out that you have to give more than half of everything you make to the government via income and self employment taxes. Read on to learn how to reduce your tax bill, and pay yourself first.

Physician Corporation – Make sure you Incorporate properly, and file the correct forms in a timely manner. Mostdocument filing services will file and charge you for the forms you request. What you really want is someone who willtell you the correct forms for your circumstances, assist you in completing them, and file them in a timely, cost effective manner. This is definitely a case of getting what you pay for, but you also do not get what you do not pay for.Unfortunately, not filing a correct form in a timely manner could cost you tens of thousands of dollars annually.

• Physician Self Employment Taxes – Set up your payroll and pay business expenses on a regular schedule. By having your business expenses and monthly payroll done on a regular schedule, you will reduce the chance that something gets overlooked, which could result in late charges and unnecessary penalties. In addition, paying yourself a fixed monthly salary will put you in the habit of saving more, and make the actual running of your business more streamlined.

• Physician Retirement Accounts – Use all possible retirement plan vehicles to their maximum benefit. While the most common retirement accounts include IRA’s and Roth IRA’s, as a corporation, the options are expanded significantly, allowing you to not only save a significant amount toward your retirement, you can also shelter these funds from taxes and judgments as well.

• Physician Investment Advisor – Hire a professional to manage your assets based upon your personal goals and objectives. You are a professional, which has taken many years of education and training. Hire a professional to manage your assets, as this will decrease the likelihood of the pitfalls met by many a part time investor, but when hiring a professional, hire someone who gets paid over time, not paid by what you invest in. Only use a Registered Investment Advisor, and never pay a sales commission.

• Physician Corporation Compliance – Keep your corporation filings current to maintain these and many other advantages that are open to you. In order to have the advantages of being a corporate entity, you must behave like a corporate entity, which includes the filing of monthly reports and holding board meetings. Failure to complete these will open you up to personal judgment and potentially hefty IRS penalties. You have worked hard to get where you are. Take the necessary steps to protect yourself from paying tens of thousands of dollars in additional taxes. While technically, you can do it all yourself, it is highly recommended that you hire a professional and do it right the first time.


For a limited time, receive FREE Incorporation when you use our Accounting and Payroll services!


My Professional CFO, LLC, is a professional services firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service, we are here to help you the with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions, or call us at: 1 (800) 517-0CFO, 1 (800) 517-0236

How to Form a Physician Corporation: A Step by Step Guide

As a physician, you have either just signed with a contract group, or you have decided to do some shifts as a Locum Tenens. There is a chance that your contract group will require you to be an employee, but that is not often the case. Now you need to form a corporation. We are often asked why. The simple answer is that it draws a clear line between you the individual and you the professional. Another response is that as a corporation, you are afforded additional tax benefits that are not available to you via Schedule “C”. Your SEP IRA contribution for one. As a physician, your options are limited to either a PC (Professional Corporation), PA (Professional Association) or PLLC (Professional Limited Liability Company). There are subtle differences in each type of entity, but there are some specifics that you will need to keep in mind. First and foremost, your state will most likely dictate what type of entity you can form, also, some states do not allow PLLC’s. Don’t just blindly form an entity without knowing the correct type of entity for you. Also, as a physician, forming a corporation will not insulate you from civil liability. For advice related to asset protection, call us. From this point forward, we will discuss the formation of a PC/PA.

The creation of your entity:

The formation process begins with a stop at the Secretary of State office, or the division of corporations. This is where you will find the forms for your specific state, along with the filing requirements and related fees. Filing requirements for professionals differ from state to state. For example, NY requires Physicians to verify their license status with the Education department before and after filing Articles of Incorporation. This is a two-step process, and involves paying two separate fees. Find out if your state has this requirement or a similar process before you file any documents. Some online Incorporation sites do not take this step. Not only will you not get your incorporation filed, you may not get your money back. Just as a precaution, before you fill out any documents, make sure there isn’t another physician in your state with your name. This can most often be avoided by using a middle initial or middle name, but you will want to be certain. Once you have confirmed this, reserve your own name. Send two copies of these documents to the state, and request a stamped copy be returned to you in a self-addressed stamped envelope.

Tax Status and Employer ID Number (EIN):

Once you have completed the Incorporation process, you will need to become legal in the eyes of the IRS. First, you will need to request a Tax ID# or Employer Identification Number. This is essentially the social security number for your business. This can be obtained online, or via fax. Simply fill out the form and submit. Now you need to address the tax status of your entity. All new corporations are seen as “C” corporations until you request to be taxed as an “S” or “Subchapter S” corporation. The difference is simple and straightforward. Do you wish to be taxed on your income twice, or only once? Most of our clients are “S” corporations. The “S” election form can be found on the IRS website, and must be filed with the IRS as soon as possible. You will receive a letter of acceptance once the IRS has approved your status. This must be completed prior to filing your first tax return. Our suggestion is to file this the same day you receive your EIN number. Send this certified mail to make sure you have proof.

Acting Like a Corporation:

Now that you are a corporation, you will have to begin acting like one. What this means is that when you do something business related, you will need to document it. First you will need to establish Bylaws. This will be the blueprint for the way you run your corporation. Sample Bylaws can usually be found on the website for the state where you incorporated. It will define what title you will have, how many times a year your board will meet, and any means to alter the nature of your entity. You will also need to have regular meetings of your Board of Directors, yes, even if you are the only one. When you hold these meetings, you will also need to keep details of what you decided to do. Whether that is opening a bank account, or entering into a contract for employment. In these minutes, you will also document how you will be compensated by your entity, and any employee benefits you will receive. You will now have to keep all of these in one place. That is why you have a Corporate Book. A corporate book can be purchased online from a variety of vendors. Within this book, you will keep the certified copy of your Articles of Incorporation, the acceptance letter of your Subchapter “S” filing, the notification letter for your EIN number, a copy of your bylaws, and each and every set of minutes from all of your Board meetings. This is the first thing that will be requested if your corporation is ever sued.

Reducing Your Taxes:

This is the primary reason you are putting yourself through this. The first reason is that as a Corporation, rather than a Sole Proprietor, you are able to make a SEP IRA contribution up to 25% of your salary versus only 20%. If you pay yourself enough to make the maximum contribution, that would be a salary of $212,000 in order to make a SEP contribution of $53,000. As a Sole Proprietor, you would only be able to contribute $42,400 at the same salary. Not contributing the additional $10,600 just cost you an additional $3,710 if you are in the 35% tax bracket. If your state has an income tax as well, you saved even more. Also, as a corporation, you can establish a Defined Benefit Plan for yourself. This can allow you to put away $100k or more annually, thus accelerating the tax savings.

Tax returns and Annual Reports:

This is where your corporation will save you money, and make all of this worth it. Your corporation will have to file a tax return each year (Form 1120S), and you will receive a form K-1, which is the shareholder profit and loss, (think of it as your 1099 as an owner of your entity.) Regardless of whether or not your state has an income tax, you will still need to file tax returns for your corporation. No taxes will be due, as those will be paid on your personal return, but pay special attention to whether or not your state levy’s a “filing fee”.

The state will also require an annual report from you, although some are every other year, but you pay twice as much. This is simply informing the state that you are still in business along with your current address.

Summary:

You can do this. Just like most things that look complicated, it is more about following the process step by step. There are no shortcuts. If you decide you need some assistance, or simply feel that you would rather work with someone who does this all the time, we would be honored to add you to our list of satisfied clients.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com!

Email us with any questions, or Call us at: 1 (800) 517-0CFO           1 (800) 517-0236

Urgent! Why Business Owners Should Act Now.

2015 CAPTIVE COUNT-DOWN
There are 12 Days remaining to start the process to form a captive and pay tax-deductible premiums in 2015!

Life is full of costs, and it seems like they are always going up. If you’re like me, you probably don’t like to think about costs. Sometimes, it’s easy to think, “I’ll worry about that later,” or “I’ll pay that later.” But, it’s early November, and there is a substantial cost that is urgent and looming. Successful business owners and their advisors have only a few weeks to address this very important cost: The Cost Of Waiting To Set-Up Their Own Captive Insurance Company (CIC) – (CLICK HERE to read What Is A CIC). This cost is usually in the hundreds of thousands of dollars and can total as much as $600,000 in lost tax savings.

This year, we have written about the many benefits of owning one or more captive insurance companies. Businesses with a captive insurance company are better positioned for long term survival (CLICK HERE to read more). Businesses that own a captive insurance company benefit from a vastly improved risk management posture. And, a captive insurance company forms the backbone or chassis for small / mid-size business Enterprise Risk Management (ERM). Captives also facilitate significant wealth accumulation by business owners (CLICK HERE to read more).

Why Is It Important Now?

It takes 6 weeks to form a captive insurance company. Businesses with a calendar year fiscal ending on 12-31 still have time to form a CIC and pay tax deductible premiums to their CIC in 2015. The deadline to start the process is November 15!

What Is The Cost Of Waiting?

The cost of waiting to form a CIC in 2015 is hundreds of thousands of dollars. Assuming a combined federal and state income tax rate of 50%, the cost of waiting can be as high as $600,000. A small captive insurance company can make an 831(b) tax election. Its underwriting profits are taxed at a rate of 0% (zero percent). To qualify as a small insurance company, the CIC must receive premiums of less than $1.2 million. Taxes paid to the IRS are gone forever, leaving businesses and their owners poorer, weaker and less prepared for risk and uncertainty.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Attorneys and Information Technology Professionals. We specialize in Corporation and LLC filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients. Email us with any questions. Call us at: 1 (800) 517-0CFO 1 or (800) 517-0236 Captive services powered by: image

The Most Efficient Approach For Businesses To Build Liquid Reserves

One of the greatest challenges that small and mid-market businesses face is building up sufficient liquid reserves. It has often been said that, “Cash Is King,” and liquid assets are key to the long term health and survival of an enterprise. Being in a strong cash position is particularly important if an unforeseen calamity strikes. Also, liquidity enables businesses to quickly adapt or pivot to address changes in the marketplace.

I recently talked with an insurance agent in the Mid-West who explained why many farmers were land and equipment rich but cash poor. During good years, many farms are quite profitable, creating strong cash flow. However, to avoid high taxes many farmers purchase brand new equipment, even if their current equipment is fairly new and in good working order.

Our experience in business has revealed two time-proven destroyers of liquid reserves:

Destroyer #1 – Uninsured Losses

Destroyer #2 – Taxes and/or Tax Incentives

As an example, consider taxes on “excess” retained earnings, known as the Accumulated Earnings Tax. This tax is deliberately designed to discourage business wealth and liquidity.The Accumulated Earnings Tax (AET) is a penalty tax, imposed on C corporations perceived as trying to avoid or defer shareholder income tax through an “unnecessary” accumulation of earnings. The AET threat is intended to encourage corporations to make timely payments of dividends, thus triggering the double taxation of C corporation earnings. Once an IRS agent asserts that there is an excess accumulation of earnings, the burden of proof shifts to the taxpayer to substantiate that the accumulations were for anticipated needs and were reasonable in nature.

Can Liquidity Destroyers 1 & 2 Be Meaningfully Addressed?

The great news for business owners is that Destroyers 1 and 2 outlined above can be addressed by one game-changing, risk management and financial strategy – Enterprise Risk Management (ERM) with a Captive Insurance Company (CIC). The chart below that visually depicts the powerful benefits of implementing an ERM approach with one or more CICs. Indeed, we know of no other risk management and financial vehicle that affords its owners the array and magnitude of benefits that captive insurance companies do. By choosing to own their own insurance company, a business owner or CFO is able to simultaneously have more insurance protection and more money.

The chart below compares the status quo on the left with ERM implementation and captive ownership on the right. This illustration covers a 10 year period and assumes a 4% rate of investment return for both scenarios. Both businesses have third party insurance coverage in place to insure core risks.

The business on the right which implemented ERM with a captive insurance company has more insurance coverage and more money. In fact, over a ten year period, the business on the right has almost 80% more wealth (or liquid reserves) than the business on the left.

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Understanding Liquidity Destroyer 1

Today, small and mid-size business owners face far greater challenges than their predecessors faced. In fact, they are far more likely to face existential threats that can drain their limited cash reserves or completely wipe out their operations. For instance, cyber risk is a growing and wildly unpredictable threat. Terrorism and impact from international conflicts are very real threats to businesses and their operations (Even if a business isn’t directly targeted, how long can cash reserves last without power…without infrastructure…without key suppliers…without key customers?).

Spending a little time on Ready.Gov, the U.S. Department of Homeland Security’s business preparedness web-site, puts the threats listed above into perspective. The threats are real and their impact can be catastrophic.

Ready.Gov notes that “40% of businesses affected by a natural or human-caused disaster never reopen.”

The government site recognizes that low-frequency and high-impact risks are the ones that pose the greatest threats to small and mid-size businesses, largely because they can wipe out liquidity. Addressing small business disaster preparedness, Ready.Gov notes that:

* “Businesses can do much to prepare for the impact of the many hazards they face…including natural hazards like floods, hurricanes, tornadoes, earthquakes, and widespread serious illness such as the H1N1 flu virus pandemic.
* Human-caused hazards include accidents, acts of violence by people and acts of terrorism.
* Examples of technology-related hazards are the failure or malfunction of systems, equipment or software.”

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Illustration From Ready.Gov On Threats Facing Small Businesses

Consider “Human-caused hazards [like] terrorism.” Ready.Gov makes it clear that any business, large or small, in the U.S. could be impacted by terrorism. Businesses should have business interruption insurance for lost revenue caused by terrorism including chemical, biological or nuclear attack.

Businesses should also be insured for business interruption caused by failure of the power grid (due to natural disaster, terror attack or a solar storm). Also, businesses should have robust business interruption insurance to cover lost revenue in the event of a pandemic disease in the U.S. It is not inconceivable that the government would confine all non-essential workers to their homes for 30, 60 or 90 days to stem a national emergency.

In addition to the existential threats covered above which can quickly empty business coffers, small and mid-size business owners face risks posed by their own governments – local, state and federal. Government regulators wield more power than in bygone days. Overzealous government regulators often “shoot first and ask questions later.” They often have the power to shut down a business until a dispute can be resolved by the courts.

Finally, litigation is an ever-increasing threat to business owners and liquidity, and the dangers come from inside and outside of their businesses. Business owners and their staffs must navigate a complex maze of employment laws, healthcare laws, worker’s compensation laws, environmental laws, tax laws and many other laws that can result in costly lawsuits. Also, many commercial insurance liability policies will cover damages, but do not cover punitive damages awarded in a lawsuit. In many cases, punitive damages awarded to plaintiffs are 3 to 10 times higher than compensatory damages.

ERM with a CIC can address the liquidity threats outlined above by supplementing commercial insurance coverage with insurance coverage provided by the CIC.

Addressing Destroyer 1 – Enterprise Risk Management – Blending Third Party Insurance With Formal Self-Insurance

For many, a far more powerful approach to risk management is Enterprise Risk Management that results in a layered or blended approach. By combining third party insurance with a captive insurance company, a business owner can establish a far more comprehensive and thorough risk management approach. ERM is also a better forward looking approach, because the captive insurance company will accumulate additional reserves in years with low claims. These ERM reserves can provide more robust insurance coverage in the future and, when necessary, can be accessed by the owner (or CFO) as a war chest to address contingencies or unanticipated risks.

What Is A Captive Insurance Company?

Simply put, a captive insurance company is a closely-held insurance company that insures primarily thought not exclusively your business. It is a C corporation and is licensed and domiciled like any large insurance company. Captives also have their own reserves, policies, policyholders, and claims. Insurance policies are issued by the captive to its parent or related companies and are actuarially priced. Owning a captive insurance company is a sophisticated way to self-insure, and captives are generally formed to insure the risks of a business, group of businesses and related or affiliated third parties. A captive (or captives) form the chassis of a small / mid-size business ERM strategy.

Why Is ERM With A CIC A Powerful Approach To Address Destroyer 1

A CIC is one of the most powerful risk management and wealth accumulation tools that a business can access. When properly employed, there is nothing else that can do what a captive insurance company does. By operating their own insurance company as part of ERM, business owners and CFOs can:

Fill Third Party Gaps
A captive insurance company can issue insurance policies that address gaps not covered by third party insurers. Captives can also insure third party insurance deductibles, enabling the parent company to raise its deductible and lower its third party insurance costs. Also, a business can enjoy more broad business interruption coverage with ERM and a CIC when an adverse event occurs, particularly events where third party insurance doesn’t cover all damages or peripheral damages.

Utilize Customizable Coverage
Captive insurance companies can write customizable coverage for the businesses they insure. Many businesses face unique risks that may not be addressed by commercial insurers. Unique coverages can also be very expensive when covered by commercial insurers. This feature enables business owners and CFOs to say, “this has gone wrong in the past, let’s insure against it in the future,” or “other companies have experienced this adverse event, we can insure this via our captive.” The flexibility afforded by a ERM with a captive is extremely beneficial in a complex world.

Benefit From Few Or No Policy Exclusions
Captives can provide broad coverage without the exclusions that riddle typical commercial insurance policies. Insurance coverage is worthless if an exclusion prevents the insured from receiving a claims payment when it needs it most.

Avoid Sunk Cost Of Third Party Insurance
Premiums paid to a captive insurance company remain the property of the captive owners (usually the business or business owners). One of the reasons that most businesses are underinsured is that purchasing insurance is a bit like purchasing a lottery ticket. If you don’t win (or in the case of insurance, experience an adverse event resulting in a claim), your money is gone with nothing to show for it. With a captive, this simply isn’t the case. Profits in the captive, defined as premiums collected less claims paid, belong to the captive owners.

Addressing Liquidity Destroyer 2 – Taxes

Over time, businesses, owners and CFOs can build up a substantial war chest with ERM and a captive insurance company. This war chest is available to pay insurance claims the business may have. And, it can also be accessed should the owner or the business require liquid funds. Assets accumulated in a captive almost always outpace retained earnings or a business’ “rainy day fund.” Because the captive is a formal form of self-insurance, it benefits from insurance law and favorable tax treatment. Hence, it is able to accelerate asset accumulation for two main reasons.

First, premiums paid to the captive receive favorable tax treatment. Premiums paid to the captive are an expense to the parent company. This lowers the parent company’s taxable income. As, the captive takes in premiums, it is taxed as an insurance company on its underwriting profits (typically defined as premiums less reserves to pay future claims). For large insurance companies, underwriting profit is actuarially determined. However, small insurance companies can make an 831 (b) tax election, resulting in a tax rate of 0% (that’s zero percent) on their underwriting profit. A small insurance company is defined as receiving premiums of $1.2 million or less per year.

Second, the captive is able to invest and grow larger pool of assets. Large commercial insurers have entire staffs whose sole purpose is to invest reserves (that have not been taxed).
For these reasons, ERM with a well-run captive insurance company will typically double liquid capital. And, the same claims that would be paid by the captive would have to be covered out of retained earnings anyway if the captive weren’t in place.

The Long Term Benefit Of Defeating Destroyers 1 & 2

When business owners are ready to sell their business or retire, they keep the war chest. A successful captive amasses wealth for its owners that can be accessed and enjoyed in the future. This unique ability to improve risk management and simultaneously stockpile wealth makes ERM with a CIC The Most Efficient Approach For Businesses To Build Liquid Reserves.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Attorneys and Information Technology Professionals. We specialize in Corporation and LLC filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients. Email us with any questions. Call us at: 1 (800) 517-0CFO 1 or (800) 517-0236 Captive services powered by: image

Advanced Strategy To Transition From Creating A Successful Business To Creating Wealth

It is not uncommon to come across successful and profitable businesses that generate little meaningful wealth for their owners. For starters, businesses often face an array of expenses in addition to operating costs that sap revenue including administrative costs, leases and insurance. What profits remain are typically ravaged by taxes, weakening the business and hampering wealth accumulation by the owners.

Advanced strategies to outrun these challenges often include starting or acquiring a second business that serves their primary business. This is often described as vertical integration, and it is often effective because a supplier or service provider is already making a profit serving the parent company.

Consider a successful business owner that chooses to stop leasing a facility in favor of purchasing a facility inside a new company owned by the business owner. In this situation, the business owner can now earn a profit on two companies and can depreciate the real estate asset in the second business to reduce taxable income as well. This strategy enables the business owner to build meaningful wealth in real estate and equipment.

Or, consider a manufacturer that purchases or starts a business in its supply chain. This manufacturer is now able to earn profits on both businesses and gain better control of risk…specifically, the risk of a key supplier folding or choosing to sell to a competitor.

As Advanced As It Gets

For many successful businesses, there is a highly advanced strategy to form a second, profitable business that can facilitate significant wealth creation for its owners. The advanced strategy is to start its own insurance company, known as a captive insurance company.

What Is A Captive Insurance Company?

A captive is a unique insurance company. It includes its own corporation, insurance license, reserves, policies, policyholders, and claims. It is a sophisticated way to self-insure and is generally formed to insure the risks of its owners and related or affiliated third parties.

A captive insurance company can serve as the backbone of an Enterprise Risk Management strategy (ERM). ERM is a more sophisticated approach to risk management that holistically expands its risk management approach in 2 dimensions – time and space. In the time dimension, a company implementing ERM shifts from managing risk year-to-year to managing risk over a 10 to 50 year horizon. This is possible because an ERM strategy with one or more captive insurance companies in place will usually accumulate loss reserves, providing increased risk management flexibility in the future. In the space dimension, an ERM approach results in a wider risk management and insurance umbrella. This occurs because the business conducts a broad risk assessment of all threats the business faces. An ERM strategy is developed and includes broader (or more) lines of insurance coverage. Typically, this larger insurance umbrella includes a blend of third party commercial insurance coverage and insurance coverage provided by the captive insurance company.

How Does This Advanced Strategy Protect & Grow Wealth?

First, the parent company is now able to insure risks that were previously uninsured. The added insurance protection provided by the captive plugs gaps in commercial coverage and addresses operational and existential threats that can threaten the very survival of the business.

Second, Enterprise Risk Management with a captive can create wealth by reducing third party insurance costs. As the captive matures and builds up loss reserves, it can help lower commercial insurance costs by taking over a portion of the core risks faced by the business. One approach is to increase deductibles on commercial policies and purchase deductible insurance from the captive. As the business and captive develop a reliable loss history and the captive builds loss reserves, the captive can also be in a position to provide “first dollar” coverage to the business for core risk. In these cases, the captive will likely purchase reinsurance.

Third, the overall (or aggregate) wealth of one or more companies with a captive insurance company is higher than the overall (or aggregate) wealth of one or more companies without a captive insurance company. This occurs for two primary reasons. First, the parent company takes an expense as it pays its insurance premium to its captive. This lowers the parent companies taxable income. And, the captive may make an 831(b) tax election if it qualifies as a “small” insurance company, so that its underwriting profits are taxed at a rate of 0%. A “small” insurance company is defined as an insurer that receives less than $1.2 million in premiums annually. Second, the captive is able to earn a return on its reserve pool (or assets). And, the captive’s asset pool has been amassed with pre-tax dollars, enabling asset growth on a larger starting base.

How Does a Captive Insurance Company Increase Total Wealth?

A captive provides many benefits to its parent company or business owner including risk mitigation, asset protection, security from creditors and increased profits. As such, a captive can form the backbone of a comprehensive ERM approach as outlined above. A captive primarily insures its parent company or related companies. Hence, the parent company is able to purchase insurance from its captive. In the early years of owning a captive, a business can insure risks that third party insurers will not insure or risks where the cost to insure with a third party is prohibitive.

These are risks that many businesses regularly face and informally self-insure. Which means that if an event occurs, the business “bites the bullet,” often taking a loss, laying off workers and possibly facing partial or total closure. With ERM and a captive insurance company in place, businesses can formally insure risks not normally insured by third party insurers.

Premiums are paid from the parent company to the captive with pre-tax dollars (up to $1.2 million annually if the captive makes an 831 (b) tax election). Captive reserves can be translated into virtually any other type of asset (some domiciles have restrictions). Hence premiums paid to the captive are in effect a “transfer of wealth” and are protected from the parent company’s creditors and lawsuits. For this reason (tax savings and reserve accumulation), a captive insurance company is an advanced strategy that helps successful businesses transition into successful wealth engines.

The Window For Successful Businesses To Implement The Advanced Strategy Of Forming A Captive And Paying Premiums In 2015 Is Closing.

It takes 60 to 90 days to form a captive insurance company. Call us to discuss whether or not a captive insurance company or additional captive insurance company is the right move for your business.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Attorneys and Information Technology Professionals. We specialize in Corporation and LLC filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients. Email us with any questions. Call us at: 1 (800) 517-0CFO 1 or (800) 517-0236 Captive services powered by: image

Game Changing Business Strategy That Turns Sunk Costs Into Sunk Profits

2015 CAPTIVE COUNT-DOWN:

There are 31 Days remaining to start the process to form a captive and pay tax-deductible premiums in 2015!


 

Today’s economic climate is challenging and earning (and holding onto) profits is not easy, making wealth accumulation and long term business survivability more daunting tasks. For this reason, business owners, CFOs and advisors including CPAs, Property & Casualty Brokers, Wealth Managers and Attorneys owe it to themselves to be vigilant in pursuing strategies that will safeguard the viability and wealth of the business and its owners. The sort of vigilance in view often requires rethinking business paradigms to look for “both – and” versus “either – or” solutions. “Both – and” thinking seeks to avoid trade-offs, equivalent to “having your cake and eating it too.”

For example, an old paradigm in the automobile market was the assumption that large, heavier cars were inherently safer. Hence, moves to improve fuel efficiency would likely come at the expense (or trade-off) of safety. The automobile industry has rejected “either-or” thinking and produced innovative vehicles that make great strides in both safety and fuel efficiency. The development of lower weight, energy absorbing auto bodies, aerodynamic designs, air bags, computer controlled engines and hybrid electric engines have combined to produce “both-and” results.

“Both-And” Thinking For Mid-Size And Small Businesses

For small and medium sized business owners in a challenging economy, a particular area the demands “both-and” thinking is insurance. Insurance is often viewed through an “either-or” lens. A well- conceived risk management and insurance strategy is a necessity. However, insurance is almost always a sunk cost. It is certainly a necessity and often critical to the survival of a business, but it remains a sunk cost. Each year, precious dollars spent on insurance premiums are gone. It is a mere cost of doing business. And, while most businesses would benefit from purchasing a broader range of insurance coverages, many don’t, because more insurance coverage means less money in the business and less wealth at the disposal of the business owner or CFO.

The Power of “Both-And” Thinking = More Insurance Protection and Significantly More Wealth

The paradigm shift required to overcome this “either-or” scenario is for business owners to make the choice to own their own insurance company. Specifically, a business can set-up and operate what is known as a captive insurance company. Large corporations have been utilizing captive insurance companies for decades, and recent laws favoring “small” captives and competition among domiciles have made captive ownership a powerful and accessible risk management tool and financial vehicle for a growing number of small and mid-size businesses. Such a decision propels a business from “either-or” to “both-and” thinking because a business that owns its own insurance company can benefit from both more insurance coverage and more wealth at its disposal simultaneously.

“Both-And” Benefit: More Insurance Coverage

Most businesses are under-insured. If a business owner, CFO or risk manager were to take an hour or so and write down every threat to the business, it is likely the list would fill up several pages. And in most cases, businesses purchase third party commercial insurance for a fraction of the risks they face. The reality is that it’s not practical or remotely affordable to purchase third party insurance for many of the threats a business faces. However, by choosing to formally self-insure many of the risks facing a business through a captive insurance company, a business owner is able to provide a much broader umbrella of insurance coverage. This improved risk management approach does not require the business to replace existing third party commercial insurance policies, although a captive can be used to replace third party coverage if it is prudent and expedient to do so. For small and mid-size businesses, the best risk management approach is usually achieved by blending third party commercial insurance with broad lines of insurance coverage afforded by one or more captive insurance companies.

Captive insurance companies have the unique ability to write customizable insurance coverage. So, they can write policies that are specifically tailored for the specific needs and challenges faced by the parent company. It is often difficult and inefficient for third party commercial insurers to write customized policies. This reality often renders customizable coverage unaffordable or impossible to acquire. Another benefit of providing insurance coverage via a captive arrangement is that captive policies do not have to include the exclusions that characterize most commercial insurance policies. In this sense, policies issued by a captive can be “wide open,” which is particularly important when a business has a loss and needs the money. Also, claims approval and processing for captive claims is simpler, more timely and more certain. For these reasons, a captive insurance company is a powerful vehicle to:

– Provide blended insurance coverage with existing third party insurance coverage

– Fill gaps in existing third party insurance policies including covering exclusions

– Insure risks that were previously uninsured

“Both-And” Benefit: Significantly More Wealth

By choosing to own a captive insurance company, a business owner or CFO is also choosing to enjoy some of the benefits of insurance law and taxation. It’s no secret that most insurance companies are very profitable. The skylines of most major cities in America are dominated by stadiums, banks, and… you guessed it, insurance buildings. Large commercial insurance companies receive millions of dollars in premiums, and in return, issue policies promising to pay in the event an insured adverse event occurs. Large insurers use actuarial calculations to reserve a large portion of premiums collected for future obligations or claims. It is important to note that these reserves are not taxed. Insurance companies are taxed on their profits, essentially computed as premiums received plus investment income less reserves for future losses, less expenses. Expenses essentially include operational, administrative, marketing and sales costs of doing business. At their core, large insurers are a lot like banks. They have a large pool of untaxed assets to invest and grow.

Small captive insurance companies are quite similar to large insurance companies as described above. However, small captive insurance companies can benefit from an addition to the tax code that was added in 1986 by Congress and signed into law by President Reagan. Small captive insurance companies can make an 831 (b) tax election if they receive $1.2 million or less in annual premiums. When a small captive insurance company makes an 831(b) election, it is taxed at a rate of zero percent (0%) on its underwriting profits. Hence, premiums received less claims paid, less expenses result in underwriting profit which is taxed at zero percent. Similar to large insurance companies, small captives will almost always have a large pool of assets to invest and grow.

The parent company or companies deduct insurance premiums paid to the captive insurance company as a business expense. This lowers operating profit and reduces taxes paid by the parent company or business owner. Also, a captive insurance company may be owned by the business, the business owner, related parties, key employees or heirs. By complying with insurance law, a captive enables a business owner to achieve the “both-and” benefit of retaining and controlling more wealth.

Paradigm Shift: From Sunk Costs To Sunk Profits

“Both-and” thinking can transform a business’ total insurance portfolio from a “sunk cost” to a “sunk profit.” As an example, consider a profitable business that spends $250,000 per year on commercial insurance policies covering general liability, property and auto. In a year with no claims, the $250,000 spent on insurance premiums is a “sunk cost.” Now consider the same company with an improved risk management strategy and a captive insurance company in place. The business still pays $250,000 on commercial policies for general liability, property and auto.

However, the business also pays $1,000,000 in premiums to its captive insurance company to acquire a wide range of additional coverages including reputational risk, administrative actions, legal expenses, cyber breach and data loss, loss of key employee, loss of key account, supply chain, directors and officers, employment practices, terrorism and a large umbrella policy. Assuming a year with no claims, the business owner or business ends the year with $1,000,000 in his or her captive insurance company. The parent company deducted $1,000,000 in insurance premiums and reduced taxes paid by the owner by $500,000 assuming 50% combined state and federal income taxes. The $500,000 in tax savings less $250,000 in third party commercial insurance premiums nets $250,000 in additional wealth retained and controlled by the owner in the total insurance portfolio strategy for the business.

By choosing to own a captive insurance company and applying “both-and” thinking, a business owner can turn risk management into a profit center, transforming sunk costs of third party insurance into overall sunk profits in a captive owned and controlled by the business owner.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Attorneys and Information Technology Professionals. We specialize in Corporation and LLC filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients. Email us with any questions. Call us at: 1 (800) 517-0CFO 1 (800) 517-0236 Captive services powered by:

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