The IRS is looking for economic justification and proper structure of the entity selected to operate a CIC. When you are satisfied that the benefits of operating a captive are worth a deeper analysis, one key question will be, “What type of captive is best for my organization?” As you begin evaluating alternatives, you will quickly discover substantial differences in the various captive types and structures of captives. You’ll also notice that these differences have a substantial impact on the captive owner’s financials. For that reason, your CFO, attorney and tax advisor will be critical members of the team that evaluates the efficacy of captive formation. In particular, a key area of focus will be the tax implications of operating a captive. While tax considerations alone should never drive a captive-formation decision, they can’t be ignored and almost always play an important role in structure decisions. Main organizational types In most cases, when a captive insurance company is formed in a U.S. domicile, it is organized as a stock, mutual, limited liability, or reciprocal company. Captives formed offshore are most often stock or mutual companies. A stock insurer is an incorporated organization that issues and sells stock to raise capital.   Read more…