Scenario

Over the years JG has grown from a one-person show into a multiple crew organization providing electrical contracting services to the commercial construction industry. Consequently, Joe had accumulated over $1,000,000 in cash retained earnings that he did not require in operations and would instead invest for retirement.

• Earlier in the year Joe had a scare. One of his crew members was found unconscious on site. After an investigation it was concluded that the crew member had an incident related to a personal health matter and no technical negligence was found to come into play.
• This got Joe thinking. What if this or a similar incident were related to some form of negligence on his or his company’s behalf? Would his retirement savings be compromised if he were sued?
• His lawyers had previously informed him that a holding company is a tool, along with adequate insurance, to help protect his company’s assets. But Joe wasn’t sure how to re-organize his structure to achieve this.

We sat down with him, assessed his situation, and decided to incorporate a holding company, transfer the shares of JG to his holding company, and initiate inter-company dividends to clear the retained earnings out of JG for safe keeping in the holding company.

Best of all, by utilizing certain tax elections and making the required filings we were able to achieve this all TAX FREE. This gave Joe some comfort and stability in his situation whilst saving on what could potentially have been a large and unnecessary tax bill.