There are no direct tax implications regarding ownership since any legitimate individual or corporate entity can own the company. As in any multi-company structure, the taxpayer should be aware of potential opportunities and consequences relative to ownership.

From an insurance premium deductibility perspective, there are certain corporate structures to be avoided. The Internal Revenue Service has attempted to deny the deductibility of premiums paid by a “parent” company to a wholly owned “subsidiary” company, therefore it is preferential to avoid a parent/subsidiary (or child) structure. A type of corporate structure that has been accepted to create deductibility is a brother/sister type of relationship. Results have been mixed.

A brother/sister relationship exists when two organizations have a common parent. For example, in an automobile dealer situation, this is fairly easy to accomplish because the dealer principal (or other entity) would normally own both the premium payor (such as an automobile dealership) and the reinsurance company (who is the ultimate payee). Instead of a parent/child relationship, this creates a brother/sister relationship which has been upheld as creating a transfer of risk. Court cases supporting this position are Humana, Inc. vs. Commissioner, Kidde & Co. vs. Commissioner and Hospital Corp of America vs. Commissioner.