Why Minneapolis Business Owners Are Rethinking Risk — And Turning to 831(b) Plans
By Corey Smith, Founder, True North Private Investments
If you’re running a closely held business in Minneapolis today, you already know the feeling. The regulatory landscape shifts overnight. Supply chains remain fragile. Cyber threats grow more sophisticated by the quarter. And the political environment — at both the state and federal level — adds a layer of uncertainty that no spreadsheet can fully account for.
Traditional commercial insurance was built for a different era. It covers the obvious risks. But what about the gaps? The exposures that keep you up at night — the ones your broker can’t quite put a policy around?
That’s exactly where an 831(b) micro-captive insurance plan enters the conversation.
What Is an 831(b) Plan?
An 831(b) plan allows a closely held business to create its own small insurance company — a “captive” — specifically designed to insure against risks that traditional commercial policies either undercover or ignore entirely. Your operating company pays premiums to the captive, which are generally tax-deductible as an ordinary business expense. The captive, in turn, elects under Section 831(b) of the Internal Revenue Code to be taxed only on investment income rather than premium income — subject to IRS limits and compliance requirements.
The result is a formalized, IRS-recognized risk-transfer mechanism that puts the business owner in a far more proactive position.
Why Now Matters
In periods of relative calm, business owners often view risk management as a checkbox exercise. But we are not in a period of calm.
Regulatory shifts at the federal level are creating real exposure for businesses in industries ranging from healthcare to financial services to energy. Litigation risk — particularly in states with active plaintiff bars — continues to climb. And for Minneapolis businesses with regional or national supply chains, the disruptions of recent years have made one thing clear: the risks you didn’t plan for are the ones that hurt you most.
When structured and administered properly, an 831(b) arrangement allows a business to file legitimate claims through its captive for covered risks — helping stabilize cash flow and protect the broader enterprise during exactly these kinds of disruptions.
The Strategic Value Beyond Coverage
What makes the 831(b) so compelling isn’t just the coverage. It’s the discipline it creates.
When a business owner formalizes their risk-management process through a captive, they’re forced to identify, quantify, and document the specific risks their business faces. That exercise alone has value. It sharpens decision-making. It surfaces vulnerabilities that might otherwise go unaddressed until they become crises.
Add to that the financial efficiency of a properly structured plan — premium deductibility at the operating company level, investment income treatment at the captive level — and you have a tool that serves both as a risk buffer and a long-term financial planning asset.
A Word of Caution — and a Call for Proper Guidance
I want to be direct here: the 831(b) space has a complicated history. The IRS has scrutinized abusive micro-captive arrangements aggressively, and rightfully so. Plans that are poorly structured, inadequately documented, or used primarily as tax shelters rather than genuine risk-management vehicles have faced significant legal and financial consequences.
That’s why proper structuring, independent actuarial support, and ongoing compliance are non-negotiable. When done right, an 831(b) plan is a legitimate, powerful tool. When done wrong, it becomes a liability.
The Bottom Line for Minneapolis Business Owners
Uncertainty isn’t going away. The business owners who will navigate the next few years most successfully are those who treat risk management not as a cost center, but as a strategic advantage.
If you haven’t had a serious conversation about whether an 831(b) plan belongs in your risk-management strategy, now is the time to start. Work with advisors who understand both the regulatory landscape and your specific business risks — and who will build a structure designed to hold up under scrutiny.
The goal isn’t to avoid taxes. The goal is to protect what you’ve built.
To learn more about this, contact Corey today.
Corey Smith is the founder of True North Private Investments, a specialized financial services firm serving accredited investors and closely held business owners. With over 20 years of experience in wealth management and alternative strategies, Corey works closely with CPAs, estate attorneys, and family offices to build tax-aware, long-term financial plans. Securities offered through Great Point Capital, LLC (FINRA/SIPC). Investment advisory services offered through Great Point Advisors, LLC (SEC-registered). This article is for informational purposes only and does not constitute legal or tax advice.