Captivating Thinking

Risk management is a challenging business.  In the twenty-first century, companies (particularly small and mid-sized ones) face innumerable existential threats.  For instance, cyber risk is a growing and wildly unpredictable threat as evidenced by the havoc recently wreaked on Target by hackers.  Terrorism is a real threat to businesses and their operations today (did you hear about the recent attack on a California electric company?  How long could your business last without power?).  Environmental disasters like the recent water contamination in West Virginia are more and more common (How long could your business last without clean water?).

Government regulators wield more power than in bygone days.  Overzealous government regulators can “shoot first and ask questions later”

We have all heard the expression “Better safe than sorry,” but is it really true?  And, to what extent is it true in business

Some captive “experts” argue that captives should be managed as much as possible like third party, commercial insurers in order to increase the odds of surviving IRS attack.  Specifically, they argue that captives should look to the standards of third party, commercial insurers when making such decisions as setting premiums, establishing reserves, deploying assets, etc.

We have long maintained that comparing the management decisions of captives to third party insurers is to compare apples to oranges.  Captives are formed for unique purposes

Tax avoidance is perfectly legal and encouraged by the IRS,

but tax evasion is against the law.

–         Internal Revenue Service Website

Business owners across America mailed checks to the IRS last week.  Parting with hard earned profits certainly isn’t easy.   Which begs the question, to what lengths should business owners and professionals go to reduce their taxes and keep more of their hard earned money?