Print Article for : Health Insurance For Business Owners

[H167]Health Insurance For Business Owners

by John Fortner, Joh

When you make the decision to start a home based business, expansion is the last thing on your mind. As you begin to create your online venture, you will be focused on laying the foundation for your enterprise. Your most important commitment will be to researching, learning and implementing new ideas and concepts. Development and growth will be concerns for another time but, be prepared, because they will come.

As you provide the effort for creating your home business, it is a good idea to be familiar with the challenges that you will face when your goals are being reached. Awareness can prepare you for some of the concerns that come with a growing business.

Depending on the nature of your enterprise, the world of business requires a few things to begin. In general, one is the capital to get started. Two is a great product or service for your customers. Three is the right advertising to attract your target audience. Four is employees who are willing to help you get your company off the ground. Your initial efforts will be focused on one thru three but hiring additional help may come sooner than you expect. When that day arrives, finding committed employees in today's market can be very challenging.

Small and home business owners must be creative if they want to attract the best employees possible. No longer will competitive salaries be the only criteria for finding the best workers. With rising health care costs, few employees can afford to be without some form of company insurance. There is nothing in the law books saying that small business owners have to provide insurance. But in today's economy, this can be a very attractive benefit to possible employees. When your home based business begins to grow and expansion becomes part of your vocabulary, considering some form of health care for your workers is essential.

One of the best ways to attract employees that are dependable is by offering some form of group health insurance. Unfortunately, these rates are typically not the best for small or home businesses because they have fewer employees in the group plan when compared to larger companies. Still, it is a good incentive for attracting and keeping employees that will help your business develop and grow.

There are incentives that you can offer to your workers to make sure that your health insurance rates stay within reasonable amounts. This could include mandatory drug testing, and even a no-smoking policy. Becoming OSHA certified and providing on the job safety and health training can also help cut your health insurance costs.

Another way for a small or home business to cut health insurance expenditures is leasing their employees from a larger company. The workers would then become independent contractors and would be able to obtain health insurance benefits through the larger outsourcing company. Because these corporations have a large amount of employees in their contract, it provides the opportunity for the home business owner to find affordable group health insurance rates.

If these options for health insurance seem overwhelming and you feel your time would be better served focusing on other areas of your business, consider using an insurance broker. These brokers can help navigate through the health insurance jungle and help you discover the right plan for your home business. It is also a good idea to ask your employees which aspects of health insurance are most important to them. Inquire and see if your workers would rather pay higher premiums in exchange for lower deductibles or vice versa. This employee survey can put you in the right direction.

As you begin the journey for creating a successful home based business, health insurance costs for employees will not be on your list of priorities. You will be focused on choosing a product, marketing your goods and growing your business. But, it is important to be prepared for the challenges and changes that you will encounter along the road to your accomplishments. As your home business evolves, adding employees may be a decision you will have to make. Providing incentives for your future workers could mean the difference between success and failure when the possibility of expansion becomes a new goal for making money online.

?He who would learn to fly one day must first learn to stand and walk and run and climb and dance; one cannot fly into flying.?

Keego Harbor, Mich.-. In the twenty-five years that Keith L. Mohn, CLU, CHFC has been creating asset management plans and compensation strategies for physicians and other business owners, he has seen financial planning techniques come and go. ?From the massive changes in the tax code enacted under ERISA in the mid-seventies through today's Pension Protection Act, one thing has become certain,? says Mohn. ?Death and taxes aren't the only things we can count on. Here to stay is also a constantly changing business, regulatory and economic environment, one through which planners must constantly navigate in order to provide advantageous money management to clients.?

Having focused on high net worth individuals, business owners and medical professionals since 1983, Mohn, says advisors like him must continue to give significant attention to traditional segments of planning, like changes in estate and pension law. However, in Mohn's view, there is an area of asset management that few advisors and almost no clients even consider as a vehicle for enhancing their wealth transfer goals. ?That is the small insurance company or captive,? says Mohn. Mohn is convinced that for a certain class of clients, financial strategies that include a captive insurance company can provide more powerful and significant wealth accumulation benefits than traditional approaches.

?Using a captive insurance company approach in planning is absolutely not for everyone,? emphasizes Mohn. ?But for the client who fits my ?captive profile,?? he adds, ?this strategy can quite possibly be the ?Holy Grail? of planning.?

Who is the typical candidate for this money management tool? Mohn says it is a successful business owner or a professional with stable, predictable income and profitability in excess of $500,000 per year (after lifestyle expenses). Benefits of a captive for this kind of client are many and far-reaching. First, a client's corporation may be able to deduct up to $1.2 million per year and convert current income into capital gains income. The corporation can create a pre-tax (tax deductible) war chest to protect the business against any disaster. Finally, the captive enables corporation owners to self-insure, with pre-tax dollars, certain risks that are not currently insured, secure in the knowledge that their large and growing deductible war chest is not accessible to creditors or owners or the business

Captive insurance companies are not a new technique in asset management. In fact some estimates have over 80% of the Fortune 500 companies utilizing captives for various reasons, mostly to manage risk more efficiently. While captive insurance companies come in many forms, they also are regulated as such. The Internal Revenue Code (IRC), allows for certain benefits for small non-life companies that qualify under two particular IRC sections: 501(c)15 and 831(b). In fact the benefits under these regulations were revisited by congress with legislation as recently as November of 2004.

Simply stated, a captive insurance company (CIC) is one that purely underwrites the risks of the other companies owned by the same owner(s) as the insurance company. For example, a group of doctors may form a CIC to underwrite tasks associated with their practice, physical facility or other related businesses they may own. Frequently, the types of risks should be risks for which ordinary commercial insurance cannot be obtained cheaply or easily.

Here are a few examples of risks that may be covered by a CIC:
?Administrative Actions Insurance
?Computer Equipment and Data Recovery Insurance
?Loss of Key Employee Insurance
?Employee Practices Liability Insurance
?Executive/Professional Liability Insurance
?Business Income Loss (Contracts)
?Litigation Expense Insurance
?eCommerce Risk Insurance
?Directors and Officers
?Kidnapping and Ransom Insurance
?Sexual Harassment Insurance
?Income Tax Indemnity Insurance
?Deductibles/Gap Coverage

A significant non-tax benefit of a CIC is that while policy terms may be tailored to meet certain events, the policies can also be labeled as ?litigation expense only? policies, providing only legal fees and litigation costs. This effectively creates the war chest to fight lawsuits with pre-tax funds, while protecting the assets against claim. Premium payments effectively remove or deplete the assets of the business being underwritten or insured. Every dollar of premium paid to the CIC has been moved out of the business and away from creditors of that business.

A good captive arrangement can protect profits of the business against loss. Because premium payments are made ?for value? it becomes very difficult for any creditor to prove a fraudulent transfer.

This leads to the advantages of asset protection and the statutory protection afforded captives. Insurance companies enjoy a very high level of statutory protection for the reserves of the company due to the requirement to protect the policy owners and to insure that the company will always be able to meet its claims responsibilities. Captive insurance companies are no different. Creditors of the owners are not in the position to force judgments against owners in personal judgments.

Here is another benefit. When the captive is no longer needed, owners can simply terminate the corporation, distribute the assets, declare gains as capital gains and pay the tax. For this reason, the entity enjoys better tax benefits than those afforded to qualified retirement plans and other compensation strategies.

Captives formed under 831(b) are structured as ?C? corporations for tax purposes. The election to be taxed as an 831(b) on the tax form is quite like making the election to be taxed as an ?S? corporation. It's simple and straightforward. As long as all the insurance company rules have been followed in the formation of the entity, the reporting for tax purposes is very straightforward. Caution must be taken in the process of establishment of the company to insure full compliance with the requirements of insurance company regulations and rules that protect the benefits afforded to insurance companies. Formation as well as ongoing administration are somewhat complex and require working with professionals who have experience in this particular section of the code.

In summary, the CIC as a planning tool for the high net worth business owner or professional can be the most powerful piece of the planning pie if structured properly. Compared to traditional methods of accumulating wealth, such as qualified retirement plans to name just one, the captive insurance company offers tax benefits, asset protection, wealth accumulation, as well as opportunities to efficiently transfer wealth to next generations far in excess of any other planning methods. Professional guidance and assistance are an absolute necessity, here, as insurance industry regulations and rules apply. Clients who fit the fact pattern metrics would do well to consider including this approach to investigate and determine appropriateness for a particular situation.

Article Source :

About Author

Both John Fortner & Keith Mohn are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

John Fortner has sinced written about articles on various topics from Business Loans, Business Loans and Business Plan. John Fortner lives in Oregon and works from his home through his online pursuits. He is the owner of Best-Income Opportunities which offers free information and proven opportunities for creating work at home businesses. To learn more about this topic plea. John Fortner's top article generates over 22200 views. to your Favourites.

Keith Mohn has sinced written about articles on various topics from How To Grow Wealth, Tax. Keith L. Mohn, CLU, CHFC is a financial consultant and lecturer, and President of Benefit Solutions Group. LLC, in Keego Harbor, Michigan, a full service financial consulting and planning firm specializing in the advising of high net worth individuals, bu. Keith Mohn's top article generates over 1900 views. to your Favourites.