Protect Profits, Slash Tax Liability!
Running a small business isn’t for the faint of heart. Every day brings new challenges: supply chain disruptions, cyber threats, sudden market shifts, unexpected employee turnover, and even global events that can shake your operations. 🌍⚡ Entrepreneurs carry all these risks on their shoulders while trying to grow profits, serve customers, and stay competitive.
But what if there was a smarter way to prepare for these “what if” moments? What if you could turn risk management into a profit-protection tool—and even reduce your tax bill in the process? 💡📉
That’s exactly what R. Kenner French reveals in his Vast Voice Podcast episode, “Protect Profits, Slash Tax Liability!” 🎙️✨ The secret weapon? A powerful but often overlooked strategy called captive insurance—specifically the 831(b) captive.
🌟 What Is Captive Insurance?
In simple terms, a captive insurance company is an insurance company that you, as a business owner, create to insure your own business. Instead of paying premiums to outside insurers (who may or may not cover the risks you really face), you set aside those funds in your own captive company.
👉 The result?
You control the money. 💰
You decide which risks are covered. ✅
You potentially gain significant tax benefits. 📊
If claims never arise, the money stays in your captive, growing and strengthening your business. It’s like being both the policyholder and the insurer.
🛡️ Why Captives Matter for Small Business Owners
Kenner highlights two big advantages:
Risk Reduction: Captives allow you to cover risks traditional insurers won’t touch—or will charge an arm and a leg for. 💸
Tax Efficiency: Under section 831(b) of the U.S. tax code, premiums you pay into your captive can often be tax deductible. That means while you’re protecting your company, you’re also potentially reducing your tax liability. 🔑
It’s a win-win: safety + savings.
📋 The Four-Part Test Every Captive Must Pass
Kenner stresses that not every captive is legitimate. To gain credibility (and avoid IRS scrutiny 👀), a captive must meet the four-part test:
Risk Transfer – The risk must genuinely move from your operating company to the captive.
Risk Distribution – Risks must be spread across multiple exposures, not concentrated on one.
Insurance Principles – The captive must operate like a real insurance company, following industry standards.
Fortuitous Risk – The risks insured must be uncertain and outside your control.
✔️ Pass these four, and you’re running a proper captive. Skip them, and you’re asking for trouble.
🌐 What Can Captives Cover?
Here’s where things get exciting. Captives can be tailored to the specific challenges your business faces, including:
🛑 Business interruption (supply chain delays, pandemics, natural disasters)
🌍 Political risk (instability in international markets)
👤 Key employee risk (loss of a vital leader or top performer)
📉 Market volatility (unexpected financial downturns)
💻 Cyber or reputation risk (data breaches, PR crises)
These are risks that traditional insurance either doesn’t cover—or charges astronomical premiums for. Captives let you address them directly, on your own terms.
🎯 Customization Is the Key
Kenner warns against using captives just for tax breaks. The IRS knows when business owners set up “paper captives” that don’t really insure meaningful risk. 🚫
The real value of a captive lies in customization:
It should reflect your actual business risks.
It should integrate into your broader financial and operational strategy.
It should give you flexibility as your business evolves.
When structured properly, a captive isn’t just a tax tool—it’s a strategic asset for long-term stability. 🌱
⏰ Why Now Is the Time to Consider a Captive
Insurance premiums are rising. Risks are multiplying. And small businesses are more exposed than ever before. ⚠️
Think about it: large corporations have been using captive insurance for decades to protect themselves and reduce tax liability. 🏢💡 Why shouldn’t entrepreneurs have access to the same strategy?
In today’s unpredictable economy, where “business as usual” no longer exists, a captive can give you peace of mind, financial resilience, and a stronger bottom line. 💪
💬 Sound Bites from Kenner
“Risk reduction strategies and tax strategies go hand in hand.”
“Captives let you cover risks traditional insurers won’t.”
“You are in control of the money in your own insurance company.”
🔑 Takeaways for Entrepreneurs
Captive insurance helps transfer and mitigate risk while creating tax advantages.
A captive must pass the four-part test to be legitimate.
Risks covered can range from business interruption to cyber threats.
Captives should always be customized to your unique business needs.
Work with experts to structure it properly—this is not a DIY project.
🚀 Final Thoughts
Captive insurance is more than an advanced financial tactic—it’s an entrepreneurial power move. By creating your own insurance company, you gain control, reduce taxes, and prepare your business for whatever the future throws at you.
As Kenner says: “You are in control of the money in your own insurance company.” 🏆
For small business owners serious about protecting profits, reducing tax liability, and staying resilient in uncertain times, exploring a captive—especially an 831(b)—may be one of the smartest strategies you’ll ever consider.
✨ Your Turn: Have you ever thought about starting your own insurance company to protect your business? What risks would you cover first?
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