http://www.kenniffonline.com/profits-after-taxation/
Construction – Accounting and Taxation
How does a contractor building a mixed – use condominium complex, faced with eye –pop – ping premium quotes from traditional insurance companies, insure his general and sub – contractors and still meet his margin – of profit target?
The answer lies in employing the versatility of an alternative risk vehicle, more commonly known as a captive. Set up as a division of the contractor’s parent company, the captive is closely held insurance company that is owned by the company and only insures its self-determined risks. Within a captive, specify types of policies, such as those that cover the risks associated ith general and sub- contractor issues can be established.
Captive and CCIP basis
Instead of paying for traditional insurance, a financially sound, well managed contracting company has the option of creating and owning its own insurance company, an option that comes with many benefits. Unlikely self –insurance, a captive protects against risk, may allow for tax – deductible premiums, controls claims, and retains the profits for its owners. In essence, risks are transferred to the captive. The owners of the captive determine the types and degree of covered risks, ownership structure, costs, and profit-taking. Since premiums are paid directly to the captive, owners reap the benefits and keep the profits of the captive insurance company themselves.
Within the captive, a contractor – controlled insurance policy (CCIP) “ wraps –up” or sets up a single insurance policy, which specifically names all the construction participants for coverage on a given project. A CCIP provides seamless coverage and simplifications claims resolutions between generals and subs. The coverage is generally broader than a traditional policy and litigation can be held to a minimum. …….Cont.
To know more about CONSTRUCTION – ACCOUNTING AND TAXATION and how a CONTRACTOR CONTROL INSURANCE POLICY t please refer to http://riskmgmtadvisors.com/
About the Author
R. Wesley Sierk, III is the President and Lead Strategist for Risk Management Advisors, Inc. He is an expert in executive compensation, corporate benefit planning, alternative risk transfer, and captive insurance formation and management. Sierk has more than 14 years experience helping highly profitable, closely-held businesses limit their risk exposure and taxes through qualified plan structures, onshore and off-shore entities, and trust arrangements. He works primarily with homebuilders, manufacturing companies, real estate developers, and sports and entertainment professionals.
To know more about this author visit http://riskmgmtadvisors.com/
11.3 – Monopoly Profits and Taxation