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Tag Archives: small business

Small Business Mistakes You Can Easily Avoid: Incorporate / Payroll Taxes / Accounting

Working for oneself is one of the “American Dreams,” but if you don’t follow certain steps, this could become your nightmare. Regardless of why you are breaking out on your own, the most important this is that you have done it. Now, the key is to not make the mistake of not properly filing the proper tax returns, and to make the necessary tax payments.

Inc. / PA / PC / LLC

Going to the Secretary of State website and filing your documents is relatively easy, unless you are a licensed professional, in which case, there may be additional steps. What is typically overlooked is that once you file with the state, and establish your entity, you then have to request an EIN number so that you can file your taxes correctly, and there may be other forms/documents required as well. The steps most often overlooked are board meetings and minutes. If you don’t behave like a corporation, you don’t get the protection of a corporation.

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.

Costs and Efficiency

It doesn’t matter if you are an Independent Contractor Physician, Attorney, IT Professional 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. Spend your time doing what makes you money, and let someone else focus on doing the things that don’t make you money, i.e., payroll, tax reporting etc.

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.

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!

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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Captivating Thinking- Game Changing Financial Vehicle For Mid-Size And Small Business Owners

The term “game changer” has often been used to describe people or entities that break from the established or expected norms.  A “game changer” often defies existing paradigms or creates new paradigms.  In sports, a “game changer” is often an athlete that is far superior to his or her contemporaries, is very versatile or seems to always deliver in high impact situations.

The same can be said of “game changers” in business.  However, in business, “game changing” behavior is often a matter of discovery or invention, unlike sports where “game changing” behavior is almost always the result of raw talent and hard work.

Our passion is discovery and invention.  Since our inception, we have been in the business of helping clients invent a superior risk management strategy and discover their own game changing financial vehicle.  Our superior risk management approach is Enterprise Risk Management (ERM) adapted for mid-size and small businesses.  While implementing ERM, clients discover the powerful financial advantages afforded to them by owning their own insurance company.  An insurance company is a powerful financial vehicle that can provide tremendous added value to businesses and business owners.  In this case, we are describing what is known as a captive insurance company or small casualty insurance company under the Internal Revenue Code section 831 (b).

First and foremost, a captive insurance company can provide more effective risk management and casualty insurance protection to a parent company or companies.  It forms the backbone or chassis of ERM for mid-size and small businesses.  To read more about ERM, CLICK HERE.  Not surprisingly, improved risk management is the primary purpose for creating a captive insurance company.

However, a captive insurance company also affords many ancillary benefits to the business, its owners and its CFO.  Owning one or more captive insurance companies enables business owners to solve for many other financial needs and wants.  We know of no other financial vehicle that delivers such a wide range of benefits.

Owning a captive insurance company as part of an ERM strategy can enable business owners and professionals to more effectively address the following wants and needs:

It is important to keep in mind, that while all the above ancillary benefits have significant value, when forming a captive insurance company, one CANNOT choose to do so primarily for the ancillary reasons above. The captive must be formed for the primary reason of enhanced risk management, insurance protection, and asset protection. An experienced attorney and captive management firm can ensure captives are set up properly with an operating plan and procedures that meet the requirements necessary to function as a licensed insurance company.

What Is A Captive Insurance Company?

A captive is a unique but REAL casualty insurance company.  It includes its own corporation, insurance license, reserves, policies, policyholders, and claims.  In addition to forming the backbone of an ERM strategy, it is a formal way for business owners to self-insure, and captives are generally formed to insure the risks of owners and related or affiliated third parties.

There are many risks that all businesses regularly face and informally self-insure.  It’s worth noting that businesses informally self-insure with after tax dollars, meaning that a business’ “rainy day fund” is usually comprised of retained earnings that have already been taxed.  With ERM and a captive 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 tax deductible or pre-tax dollars, and can accumulate tax-free as reserves of the captive (up to $1.2 million annually).  Reserves can be transferred into virtually any other type of asset (some domiciles have restrictions).  Hence premiums paid are in effect a “transfer of wealth” and are protected from the parent company’s creditors and lawsuits.

While ERM with a captive don’t fit all business situations, countless business owners are missing out on the game changing benefits that ERM with a captive insurance company can provide them.  Discovery is the first step.


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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Why All Small Businesses Need A Business Manager

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.