Strategic Restructuring Saves Family Construction Business: Reducing Insurance Costs and Tax Liability for Our Clients ![Sacramento Business Tax Attorney John Goralka]()
By, John M. Goralka
Sacramento, CA
We assisted a 3rd generation family construction business when they unexpectedly received an extraordinarily insurance bill that was so high, with an extremely high deductible in the event of loss, that the policy was essentially a highly expensive form of self-insurance that put their personal assets at risk. They were unable to find an insurance company to work with because their gross income was too high. Note that the cost of the insurance was in large part tied to the gross income received each year.
At the last minute, with only a few months before the policy expired (because that was when the clients came to us with the hope of avoiding dissolution of the highly profitable business), we were able to split the company into seven different businesses. The Clients, a husband and a wife were both licensed contractors and intimately involved in the business operations. A contractor can have three separate entities tied to his or her license.
We sett up a separate company to handle purchasing the supplies, so we were able to remove the cost of the supplies from the annual gross income from any of the contracting companies. In addition to the business structure, they needed to work with their customers to implement the change and to have new contracts and agreements for each of the entities' business operations. This new structure enabled them to continue business operations with a reasonable insurance cost.
The new structure was very helpful years later when the business was sold. We were able to minimize tax by using a combination of asset purchase and stock purchase sales with the different entities.
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Sacramento Estate Planning, Tax Planning and Business Attorney.
I’m John Goralka, a Sacramento Estate Planning, Tax Planning and Business Attorney at the Goralka Law Firm, P.C. If you have an estate, tax or business situation needing legal help, contact our team for experienced and friendly advice. You can contact us at 916-440-8036. Alternatively, you can use our convenient online contact form here on our website. We listen, and you can have your questions answered, your case evaluated, and explore your options for getting the legal help you need.
There are almost 200,000 attorneys in the state of California, and fewer than 100 of those attorneys are State Bar Specialists in Estate Planning, Trusts and Probate and State Bar Specialists in Taxation. I am one of the few attorneys with both critical specializations. I passed the California CPA examination and am a former income tax auditor and hearing officer. I am also recognized as a top attorney in the United States by US News and World Reports and by Best Lawyers and hold an AV rating from Martindale which is the premiere rating organization for attorneys. The AV rating is the highest possible rating for legal experience and for legal ethics.
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