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Case Study
Construction Company

Small Business

3 Partners, $24MM in Gross Revenue, $5MM in Net REVENUE

Goals: When coming to us, this company had an established 401(k) plan, as well as a Buy-Sell agreement funded for $6MM with VUL policies for the past 8 years. Their main problem was in regard to the taxes they were paying on a $5MM net revenue. Additionally, their CPA wasn’t bringing any new ideas to the table.

How We Helped:


  1. Established a Captive Insurance Company

  2. Our team worked to establish a company that would be owned by their small business. Additionally, we funded it with $1.1MM per year for the next 10 years. This helped to establish:

      • Net effect on taxes; savings of roughly $400,000 per year for the next 10 years.
      • Management of money in a brokerage-managed account.

  3. Added a Self-Insured Cash Balance Plan to Their Retirement Plan

  4. With $350,000 per year for the 3 partners and $27,000 for the 18 employees, this plan will help with the company’s retirement planning.
    This also assisted with:

      • The relationship brought in; a TPA firm with knowledge on how to handle the calculations and testing with self-insured cash balance plans.
      • Net effect on taxes - $140,000 per year for the next 10 years.
      • Management of money; pension life insurance and indexed ETFs. Both will assure there are no overfunding or underfunding issues and will keep their pension insurance premiums low.

  5. Tax Credits for TPA Services


    This helped show their CPAs how to get the credits. It also assisted with the net effect on taxes - 21 employees at $250 each = $5,250. It now covers the entire TPA cost.


  6. Certified Business Valuation


    With $0 charged, the value was emphasized in working together. Their total valuation was $24MM.


  7. Buy-Sell Agreement Funding Review

    The company was underfunded and they were paying all the premiums on an after-tax basis at $80,000 per year. With the proper structure, they could not only use the bank’s money to pay premiums but would also be able to repay the bank with the before-tax dollars.


  8. Life Insurance and Disability Buy-Out


    This included:


    1. • Product 1: $7MM per owner; WL policies payable for 10 years.
      • Product 2: $7MM per owner; DI policies.
      • Premiums: $550,000 per year for 10 years.

  9. Premium Financing

    1. • Relationship brought in; bank to handle the financing.
      • Product; bank financing of the premiums at 4%.
      • Net effect for clients; $24,000 per yearly premium out of pocket with after-tax dollars.
      • Loan repayment; $5.5MM will be repaid after 10 years with the before-tax dollars account which at this point would be worth around $15MM.

        Note: At this point, buy-sell WL policies will have more than $5.5MM in the cash value. So, in effect, we will be replacing the assets and using the bank’s money to create it.

  10. Financial Planning for Owners


    This included:


    1. • Individual financial plans with eMoney.
      • Products; consolidating their other investments worth $1MM in managed accounts.
      • Fees; $5,000 per plan.

  11. Estate Planning for Owners


    This included:


    1. • Relationships brought in; law firm to handle the planning.
      • Our role; advisory role on how HDAPT trusts would work in the future; how the company’s ownership of the LI policies would be transferred to individual ownership in the years to come; how the termination of the captive insurance company would work and how the proceeds would be used to fund the trusts.

What Were the Results?


  1. Taxes: Small businesses will be saving around $550,000 in taxes per year for the next 10 years, equaling $5.5MM over the next 10 years.

  2. Creation of additional assets to the company/assets on a pre-tax basis:


    1. a. Captive insurance brokerage account; $10-15MM in 10 years.
      b. Cash balance plans; $6.9MM between 3 owners in 10 years.
      c. CV in life insurance; $6MM in 10 years.

  3. Creditor protection for the assets.

  4. Financial planning and estate planning creation and protection for the business and families if something were to happen to any of the owners.

Relationships Brought in:


  1. TPA (knowledgeable in dealing with self-insured plans)

  2. Bank (premium financing)

  3. Law Firm


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