How the Ultra Rich Get Rich and Avoid Taxes Legally
Summary
- An ESOP is an employee stock ownership plan where you sell between 33% and 49% of your business, keeping a minority stake.
- A bank finances your employees, backstopping that debt with the equity you sold them.
- The bank gives them a loan to pay you for the stock you provided.
- You can help your employees create wealth while receiving a tax-free check yourself.
- You trade the equity of the business, get cash for what you allocated to employees, but still retain control of the asset.
- Even after selling part of the business, the asset maintains its value in the private sector.
- Combining the equity and the cash ensures you still have your full valuation, while gaining liquidity.
- According to current tax laws, this payment is tax-free.
Video
How To Take Action
I would suggest implementing an ESOP if you're a small business owner looking to grow your business and help your employees create wealth. Here's how you can get started:
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Assess Business Value: Determine the value of your business. You need to know what your business is worth before selling any part of it. This step doesn't cost much, just some time and possibly consulting with a financial advisor.
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Consult with Experts: Talk to financial advisors and legal experts who specialize in ESOPs. They can help you understand the process, legal requirements, and financial implications.
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Plan Employee Involvement: Identify the employees who will benefit from the ESOP. This rewards loyal employees and ensures they have a vested interest in the company's success.
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Negotiate with Banks: Approach banks to discuss financing options for the ESOP. The bank will finance your employees, helping them to acquire equity in your business.
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Sell Minority Stake: Sell between 33% and 49% of your business to the employees through the bank. This percentage ensures you retain control while providing significant ownership to your employees.
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Receive Tax-Free Payment: Once the employees purchase the stock using the bank loan, you receive the payment tax-free. This influx of cash can be reinvested into the business or used for personal financial goals.
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Maintain Control & Value: Even after selling the equity, you maintain control of the business and its value. This strategy combines liquidity with continued management.
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Monitor and Communicate: Keep open lines of communication with employees to ensure they understand their investment and role in the company’s success.
Using these steps, you can leverage an ESOP to grow your business financially, motivate your team, and gain liquidity.
Quotes by Alex Hormozi
"An ESOP is an employee stock ownership plan where you sell between 33 and 49%"
– Alex Hormozi
"A bank will finance your employees backstopping that debt with the equity that you sell them"
– Alex Hormozi
"You get a tax-free check you just traded the equity"
– Alex Hormozi
"You still own the asset and so the asset is still worth what it is in the private realm"
– Alex Hormozi
"You get the liquidity and you keep the control"
– Alex Hormozi
Full Transcript
how the ultr rich get rich and avoid taxes legally an ESOP is an employee stock ownership plan where you sell between 33 and 49% mind you this is a minority stake in your business and a bank will finance your employees backstopping that debt with the equity that you sell them then the bank gives them the loan to pay you for the stock you gave them it's kind of how it works you can help your employees get wealthy you get a taxfree check you just traded the equity and you get cash for what you gave the employ employees but you still own the asset and so the asset is still worth what it is in the private realm so if you add those two things together you still have a billion dollars but you get the liquidity and you keep the control this payment at least in our tax laws is taxfree
