The Corporate “Shield”

Ask any shareholder of a closely held corporation whether they may be held liable for the tax obligations of the corporation, and they will likely respond “of course not, that’s why we established the corporation – to benefit from the limited liability protection it provides.”

Some of these shareholders will be surprised

Captives: In Theory

Assume that a business pays commercial market insurance premiums to commercial insurers to insure against various losses. These premiums are deductible in determining the business’s taxable income. As in the case of most P&C insurance, the premiums are “lost” every year as the coverage expires.

A business will sometimes “self-insure” by setting