Captive Insurance

Most accountants and small business owners are unfamiliar with a great way to reduce taxes and expenses. By either creating or sharing “a captive insurance company”, substantial tax and cost savings will benefit the small business owner. Over 80% of Fortune 500 companies take advantage of some kind of captive insurance company arrangement. They set up their own insurance companies to provide coverage when they think outside insurers are charging too much, or coverage is simply unavailable. The parent company creates a captive so that it has a self-financing option for buying insurance. The captive then either retains the risk of providing insurance or pays reinsurers (companies that reinsure insurers) to take the risk.

If you buy insurance from a standard insurance company, your money buys a service, but the money is spent and gone forever. When you utilize or “rent a captive”, your money buys a service but it is invested with a good possibility of a return.

In the event of a claim, the company pay claims from its captive or from its reinsurer. To keep costs down, captives are often based in places where there is favorable tax treatment and less onerous regulation (i.e. Vermont, South Carolina, and Bermuda).

Optimum utilization of a captive by a small business, medical practice, or professional

The best way for a small business, medical practice, etc., to take advantage of captive benefits is to share or rent a large captive. You can significantly decrease your costs of insurance and obtain tax deductions at the same time. There are, as well, significant tax advantages to renting a large captive as opposed to owning a captive.

The advantages of “renting a captive” become apparent when you consider that the single parent captive may be forced to use less than adequate standards or marginal service so they can meet the financial requirements associated with the initial general licensing and administrative costs of establishment. Additionally, when renting a large captive, the captive bears the burden of initial capital commitment and protects reinsurers from runaway claims and unnecessary losses through their underwriting protocols and claims management practices, all at significant savings to the small business owner.

Other advantages include low policy fees and no capital responsibilities to meet solvency requirements or annual management and maintenance costs. By renting a large captive, you only pay a pro rata fee to cover all administrative expenses for the captive insurance company. Another significant advantage of renting a large captive is the ability to take a loan. It is illegal for an individual captive to make loans to subscribers. When renting a large captive, however, the individual subscriber has no ownership interest, and this difference makes it legal for a rented captive to make loans to individual subscribers. So you can make a tax deductible contribution, and then take back money tax free. Operation of an individual stand alone captive insurance company may not achieve the type of cost savings that a small business could obtain by renting a large captive. To rent a large captive, your company simply fills out some forms. Renting a captive requires no significant financial commitment beyond the payment of premiums.

Buyer Beware

As with many strategies to enjoy tax savings and advantages, you must to do this correctly. IRS and other problems have happened, in the past, to those that have done this improperly or abusively. You probably want to work with a large captive that already has over fifty million in assets and is being rented by at least 200 different companies. Also, you’ll not want to own or control any part of the captive. As an unrelated party, you can more likely significantly decrease your cost of insurance, eliminate capital requirements, and minimize maintenance costs.

You want to deal with a large captive that meets the risk shifting requirements of IRS Revenue Ruling 2005-40. Be cautious about setting up your own small captive. In addition to all the costs, a small captive may find that the expense of defending itself from regulatory oversight is much greater than any benefits received.

Outsourcing, Captives, and BOTs, Oh My!

The Challenge:

Skills are critical, capacity is needed, costs are important, but what’s right for your business? There are different models out there that can provide strategic or tactical resources to your company. Depending on your objectives, one model can provide a much better value to your business than others.

So, where should you begin? The first place is get clear on your objectives and desired results. Are you trying to fill skill shortages, improve your capacity, improve your cost base, or all three? Are the resources you seeking part of the core competency you bring to the market? By thinking of these questions as you review the options, the answer will become clear.

Captive or Hybrid:

If the need is strategic and impacts your core competency, it is important that you maintain control over the resources. Partnering with another company may be viable, but you should not partner with another company if it has the same core competency as you. The reason, you invite a possible competitor into your business and customer base.

So what is the alternative? A captive or hybrid captive operations allows you to select and manage a team that will add to your core competency and maintain control. In many if not all respects, the staff are your employees, managed by you.

Hybrid captive models take away many of the traditional risks of going to another country A hybrid model provides the recruiting of talent and other human resource management services, while at a lower cost than an outsourcer or BOT arrangement.

Hybrid captive services include locating or providing facilities and managing them. Often, there is no lease commitment, reducing the risk of being tied to a long term rental agreement. The model typically provide an option to go to a full captive arrangement, setting up your own legal entity, your own lease or purchase of facilities, and the transfer of all employees as part of the process for a fee.


If the need is not strategic or it is not part of the core competency of your business, outsourcing may provide a very good alternative. A good example where this has worked for many companies is marketing. Marketing is important to your business, but for many companies, it may not be a core competency or skill within your company. Finding a strong partner could have a very positive impact to your business while not putting your core business, competency or customer base as risk.

Typically, an outsourcer has staff on hand or bench. This provides both a benefit and a cost to you since you pay them to have and maintain extra resources. The model typically does not allow you to have control over which personnel will be assigned to you or how long they will stay working with you.

Like a hybrid captive model, outsourcing does provide the advantages of not having to deal with the human resource risks such as employment laws, benefits, hiring, and firing of employees. It also does not require the need to directly lease or own facilities as all these costs are part of the outsourcer’s fees.


If the need is more strategic and the desire is to postpone the management of a team, in theory a BOT may provide a good solution. A BOT is a build, operate, and transfer operation. In many respects, a BOT is an outsourcing relationship, with the intent to transfer the operation as some future time. The idea is to provide you with a choice of the team you will have working with you. It is worth noting that in a very high percentage of the time, the transfer never takes place.

In the case of BOT’s, there are typically more risks that are part of the model. Depending on the approach, you may be required to sign up for facility leases, facilities management and other services.


So what is the right choice? It comes back to your needs and objectives. If it is non-strategic or tactical, outsourcing may be a good option. If it is strategic and part of your core competency, a hybrid or captive is the best choice. If it is something in between, a BOT may provide a good alternative.

In all cases, it is important to understand that it will take time and commitment from your team. Using global resources can fill skill shortages, provide capacity, and even lower costs, but it does not come without effort.

Affiliate Marketing – Make Some Great Legal Tender – Here’s How It Works

For everyone who would like to make some cash online, affiliate marketing is one of the best means to get started.

How much would you enjoy picking up a little extra money each month? Or even replace your income, struggling less and making more bread?

Affiliate Marketing: make some great money, here’s how it works

Affiliate marketing is the operation of introducing online shoppers to particular products and grabbing a percentage of the sale for your efforts.

As an affiliate marketer, you are assigned your own links to a product. This is so the seller can tell when a customer that you referred buys their product.

What are the benefits of affiliate marketing?

There’s a whole bunch. For one, this is a very good way to make a passive income, because folks from all over the globe are acquiring stuff online every minute of every day. You don’t need to put forth any of your own products either.

A lot of sellers offer terrific motivators to affiliate marketers, with some offering as much as 50% to 75% in commissions on products that you bring customers to.

It’s really easy to find places in which to insert your links and make great money. As a result, you can earn some cash on the side, or even replace your total salary if you get good at it.

Article writing

Writing articles that relate to the products that you’re making an effort to promote can be hugely beneficial in many ways.

Writing articles on one topic, but with lots of viewpoints will give you a leg up to understand precisely what the product you’re promoting is all about and help you to recognize your target audience.

Also the more articles you write, the more everyone will learn about you. This develops your online presence and your credibility as well. And that will be huge later on down the road, when you’re ready for your own website.

Writing blog articles

Writing blog articles for free as a trade-off for being permitted to place links to your products may quite possibly be helpful because you will have complete access to each blogger’s followers.

Now you don’t need to go out and locate your own prospects. You simply market to people who are already captivated by the idea and are web-savvy. Which by the way, is a must for somebody who is considering paying for merchandise online.

Not to mention, there are also article sites that will enable you to integrate links to your merchandise at the bottom of the article. And better still, there are some sites that may even pay you small fees for your articles.

The secret to drawing as many guests as possible is to compose a terrific article that doesn’t look too much like a sales pitch. And at the same time, enlightens your readers on how their lives can possibly be even more improved if they check out the stuff that you have listed.

Affiliate Marketing: make some great money, here’s how it works

One fine day, you’re eventually going to want to jump in with both feet and get your very own website. This is going to open multiple channels of communication with millions of potential buyers.

Here is where you can manage your own store with links to the assortment of products that you are marketing, as well as develop a customer base through blogging.

It doesn’t need to be something fancy, only something uncomplicated so customers can navigate easily.

Along with using social media marketing as a means to get even more people connected, you can ultimately have tremendous success with affiliate marketing. As long as you single out quality merchandise to market and promote them convincingly.