Your Whale Client Won't Stay Forever. Move Its Profit Where It Can't Leave With Them.

By Craig S. Cody, CPA, Certified Tax Coach.

If one client is a big share of your agency's income and you're keeping them, protect yourself by moving as much of the profit they throw off as you can out of the agency and into accounts you own personally, every year. Three places do most of the work: a defined benefit plan (usually a cash balance plan), a captive insurance company that insures real risks, and a plain brokerage account. Each does a different job, and one of them comes with IRS rules you have to take seriously.

Over the years I've seen many an agency crippled because they had a whale client, one worth more than 35% of AGI, and lost it. (AGI here means agency gross income, your revenue after pass-through costs.) The whale usually wasn't the mistake. Spending everything the whale paid was, and sometimes that was because it was subsidizing low-margin clients!

Why Move the Money Out of the Agency?

Because cash left in the agency gets spent by the agency.

A big client brings a bigger team, a bigger office, another tool, another layer of management. Profit sitting in the operating account quietly turns into next year's overhead. When the client leaves, the overhead stays.

Money in your personal accounts does two things. It's yours if the worst happens. And it can go back in: if the whale gives notice, you can lend it to the agency to carry the team while you replace the work. Money that's already been spent can't do either.

There's a quieter benefit, too. When real money is set aside, the whale stops running your decisions. You can hold your price, push back on scope, even walk away from a poor fit, because losing them would hurt instead of end you.

How Much Should You Move Each Year?

As much as you can, once one thing is covered first.

Start inside the agency. Know what the whale actually earns you: its revenue less the team and costs it takes to serve it. Then keep enough in the agency to cover the gap if they gave notice tomorrow, meaning the payroll of the humans serving that account for the months it would take to redeploy them or replace the work. That's your runway, and it stays in the business.

Everything above the runway is a candidate to come out. Decide the share up front and move it on a schedule. Don't wait to see what's left in December. What's left in December is usually nothing.

Option One: A Defined Benefit or Cash Balance Plan

This is usually the biggest and most tax-efficient bucket.

A cash balance plan is a type of defined benefit (pension) plan. The agency's contribution is deductible, the money grows tax-deferred, and the amounts can run far past what a 401(k) allows. For 2026, the most a defined benefit plan can pay out as an annual benefit is $290,000, per IRS Notice 2025-67. How much you can put in each year to fund toward that depends mostly on your age.

I won't quote you a contribution table. An honest number needs an actuary and your own payroll census, and anyone showing you one up front is showing you a sales illustration.

Agencies also get an edge here that most cash balance content misses, because it's written for doctors. I walk through it in cash balance plans for agency owners.

Before you start, know three things:

• It's locked up. This is retirement money. It protects you personally, but it won't carry payroll if the whale leaves.
• It's a commitment. A pension comes with a required contribution every year, and the IRS expects a plan to be permanent, not a one-year shelter. Design it around the profit you're confident in, not your best year.
• Your team comes along. Eligible employees have to be covered and the plan has to pass testing. Budget for what that costs.

Option Two: A Captive Insurance Company

A captive is an insurance company you own that insures your agency's real risks. The agency pays it premiums, which are deductible if the arrangement is genuinely insurance. If claims stay low, the money builds up inside the captive, outside the agency.

A small captive can also elect under section 831(b) to be taxed only on its investment income, as long as its premiums stay under the annual limit. For 2026 that limit is $2,900,000, per Rev. Proc. 2025-32.

That's the appeal. Here's the part to take seriously.

The IRS has fought abusive small captives for years, and in January 2025 it finalized regulations that put two kinds on its radar:

• A listed transaction, the IRS's label for what it treats as tax avoidance: the captive moves premium money back to the owner or the agency without tax, through a loan or a guarantee for example, and its claims run under 30% of its premiums.
• A transaction of interest: either one of those, or claims under 60% of premiums.

Both have to be disclosed to the IRS, with penalties for failing to.

So the test is simple to say. A captive has to be insurance first. It has to cover risks your agency really has, at premiums an actuary would defend, and it has to pay claims when they happen. Borrowing the money back is the exact move that can turn it into a listed transaction. If the pitch you're hearing leads with the deduction instead of the risk, walk away.

Option Three: A Plain Brokerage Account

The least exciting bucket is often the most useful.

There's no deduction. The money going in has already been taxed, and what it earns is taxed along the way. In return you get no required annual contribution, no testing, no IRS disclosure, and money you can reach in days.

That makes it the only one of the three that can actually bridge the gap if the whale leaves. Keep it boring, keep it diversified, and treat it as untouchable for anything except the agency's survival or your own future. What goes in it is a conversation for your financial advisor.

Which Bucket Does Which Job?

Most owners with a whale need at least two: the brokerage account as the bridge, plus one bucket that cuts the tax bill.

Who Is This Not For?

If your largest client is under about 10% of AGI and your top three are under 25%, concentration probably isn't your biggest issue. Saving is still smart, it's just not urgent for this reason.

If the agency isn't solidly profitable yet, fix the margin first. You can't move profit you don't have.

And if you're a solo owner with no team, a cash balance plan can still work, but the agency edge I mentioned above doesn't apply to you.

What Can You Do This Week?

1. Calculate the whale's real profit for the last twelve months: its revenue less the team and costs it takes to serve it.
2. Set your runway number: the payroll of the humans serving that account, times the months it would take to replace the work.
3. Pick the share above the runway that comes out every year, and put the first transfer on your calendar.
4. Ask any captive pitch three questions: what risk does it insure, who priced it, and does the money ever come back to me as a loan?

Frequently Asked Questions

Should I take money out of my agency if I have one big client?

Yes, once the agency has enough runway to carry the team serving that client while you replace the work. Above that, money left in the agency tends to become overhead, and overhead stays when the client leaves.

Is a cash balance plan worth it for an agency owner?

Often, if profit is steady and you want a large deduction. For 2026 a defined benefit plan can pay an annual benefit of up to $290,000, and what you can contribute depends mostly on your age. The money is locked up for retirement, so it protects you, not the agency's payroll.

Is captive insurance legal?

Yes, when it's real insurance: real risks, actuarially sound premiums and claims that get paid. Since January 2025, small captives that lend premium money back or pay very few claims are listed transactions or transactions of interest, and they must be disclosed to the IRS.

What is the 831(b) premium limit for 2026?

$2,900,000, per Rev. Proc. 2025-32. A small captive under that limit can elect to be taxed only on its investment income.

What should I do if my biggest client leaves?

Use the agency's runway first, then the brokerage account if you need more time, lending the money to the agency to carry the team while you replace the work. Retirement plan money isn't built for this, which is why the liquid bucket matters.

Let's Talk

Every whale is different, and so is the right mix of these three buckets. If you'd like help working out your runway number and which bucket fits your agency, book a Free Tax Analysis. It starts with a short 15-minute call, so nothing sensitive changes hands before we've talked. Email me at craig@ccodycpa.com to schedule it, or request one with the form on this page.

Craig S. Cody is a CPA, Certified Tax Coach, and retired NYPD Lieutenant. His firm works with more than 70 marketing and advertising agency owners every month, helping them keep more of what they make through proactive tax planning.

This article is general education, not advice for your specific situation. Confirm your own facts with your advisor before acting.