{In the last|Within the last} 20 years, many small businesses have begun to insure their own {dangers|hazards} through a product called "Captive Insurance. " {Little|Tiny} captives (also known as single-parent captives) are insurance companies established by the owners of closely {kept|placed|organised} businesses looking to {make sure|guarantee|ensure} risks that are either too costly or too difficult to insure through the traditional insurance {market place|market|industry}. Brad Barros, an expert in the field of captive insurance, explains how "all captives are {cured|cared for} as corporations and must be managed in a method {constant|steady|regular} with guidelines established with the {INTERNAL REVENUE SERVICE|IRS . GOV|RATES} and {the right|the proper|the correct} insurance limiter. "
According to Barros, often single parent captives are owned by a trust, partnership or other structure established by the premium payer or his family. When properly designed and administered, a business can make tax-deductible {high quality|superior|high grade} payments to their related-party insurance company. {Based on|According to} circumstances, underwriting profits, if any, can be {paid|paid for|settled} to the owners as {payouts|returns|benefits}, and profits from liquidation of the company may be taxed at capital gains.
Premium payers and the captives may {get|produce|achieve} tax benefits only when the captive operates as a real {insurance provider|insurance carrier}. {On the other hand|Additionally|Otherwise}, advisers and {company owners|businesses|companies} who use captives as {property|house|real estate} planning tools, asset {safety|security|safeguard} vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company may face {serious|severe|fatal} regulatory and tax {effects|outcomes|implications}.
Many captive insurance companies are often formed by US businesses in jurisdictions outside of the {Usa|Combined|Unified} States. The reason for this is that {international|overseas} jurisdictions offer lower costs and greater {versatility|overall flexibility} than their US counterparts. {Because|Since|While} a rule, US businesses {may use|are able to use} foreign-based insurance companies so long as the jurisdiction meets the insurance regulatory standards required by the interior Revenue {Support|Services|Assistance} (IRS).
{There are many|There are numerous|There are lots of} notable {international|overseas} jurisdictions whose insurance {rules are|restrictions are|polices are} {named|acknowledged as} safe and effective. These include {Cale?on|Short|Collant} and St. Lucia. {Cale?on|Short|Collant}, while more expensive than other jurisdictions, {hosts|houses} many of the {biggest|greatest|most significant} insurance companies on the {world|earth}. St. Lucia, a more {affordable|inexpensive|cost-effective} location for smaller captives, is noteworthy for statutes that are both progressive and compliant. {Saint|Street|E}. Lucia is also {recognized|critically acclaimed|celebrated} for recently passing "Incorporated Cell" legislation, modeled after similar statutes in {Wa|Buenos aires|California}, DC.
Common Captive Insurance Abuses; While captives {stay|continue to be} highly good for many businesses, some industry {experts|specialists|pros} have begun to {incorrectly|wrongly|badly} market and misuse these structures for purposes {besides|apart from|aside from} those intended by {Our elected representatives|The legislature}. The abuses include the following:
1. Improper risk shifting and risk {circulation|syndication|division}, aka "Bogus Risk Pools"
installment payments on your High deductibles in captive-pooled arrangements; Re insuring captives through private placement {adjustable|varying|changing} life insurance schemes
3. Improper marketing
4. {Improper|Unacceptable|Incorrect} {life insurance coverage|insurance coverage|a life insurance policy} integration
Meeting the high standards imposed by the IRS and local insurance regulators can be a complex and expensive proposition and should {be|just be} done with the assistance of competent and experienced counsel. The ramifications of failing to be an insurance company can be devastating and may include the following penalties:
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