We have a client (S Corp) who is thinking about becoming a shareholder in an Association/Member Captive. The initial investment in stock of the captive is only $10k but I think his premium payments will be in excess of $100k per year.
The captive provider sent a letter detailing all the foreign filing requirements . Form 5471, FinCen 114, Form 8938 and the Form 926. I am familiar with the Fin Cen 114 and the 8938.
The letter said we would need to file the Form 5471 in our first year but in looking at the instructions it says only if you are a 10% or greater shareholder. We are about a 2% shareholder . Group has over 50 members.
I was thinking it could not hurt to file the Form 5471 but we do not qualify as a Category 2 filer and I am not sure what the benefit would be to claim that other than avoiding a non file penalty which could be steep.
Any other issues with these Association Captives?