Captive Insurance Companies

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Tired of paying so much federal and state income tax?  Looking for tax deductions?  Tired of spending so much money on property casualty insurance?  Wish you could save more money for future expansion or to create a rainy-day fund?  For some businesses, setting up a captive insurance company may be the answer.
Setting up a captive insurance company which complies with IRC section 831(b) has several advantages.  The premiums paid to the captive are deductible by the operating company, but are not treated as income by the captive.  The captive pays tax only on the investment income it generates.  The operating company would still likely maintain some reinsurance to cover catastrophic loss, but the cost of insurance paid to third parties is reduced.   And setting up a captive creates a pool of assets that are protected from the operating company's creditors.

Generally speaking, the annual operating cost for a captive ranges from $50,000 to $75,000 which includes underwriting, policy writing, financial reports, bookkeeping, audit fees, actuary review and risk pool fees (if the captive is not a stand-alone).    The amount of the annual premium that is paid to the captive is generally in the $500,000 to $1,000,000 range.   The maximum annual premium permitted is $1,200,000.
If you are interested in finding out more about captive insurance companies, please give me a call or email.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING. In an effort to create jobs in  Ohio, the legislature enacted a new "InvestOhio" Tax Credit to reward investments in an eligible small business.   Under the new law, a non-refundable 10% tax credit is available for any qualifying “cash for equity” investment in a small business up to $1 million per eligible investor ($2 million for spouses filing jointly).  An eligible investor is an individual, estate or trust subject to  Ohio personal income tax.   The Director of Development is authorized to award up to $100 million in tax credits during the current State of Ohio fiscal biennium, which ends on June 30, 2013.  If you have any questions about how to apply for the InvestOhio tax credit give me a call.Jsenney@pselaw.com or 937-223-1130.