Take a look at the most successful businesspeople in the world…
Jeff Bezos (Amazon)
Elon Musk (Tesla, SpaceX)
Mark Zuckerberg (Facebook)
Larry Page (Google)
Etc. Etc.
Besides being some of the wealthiest people on planet earth…
What else do they have in common?
They all own business’s and live in California, US.
And if you didn’t know…
California has the highest personal tax rate out of all other states in the US.
But why would the world’s wealthiest businesspeople all live in the highest taxed state?
Because they use a hidden tax strategy most businesspeople don’t know about!
Let me explain…
Below is a business growing from $100K in profit to $2M in profit over a 5-year period…
Pay close attention to how the company value far outpaces the growth of profit.
While the business has profited $2.925M over those 5 years…
The company has appreciated in value by $5.7M!
But let’s park that for a moment…
Here’s where things get really interesting.
(read very carefully)
Let’s look at years 4 & 5…
Over that period the business made $2M in PRE-tax profit and grew $3M in value… a total of $5M.
POST-tax, the business made $1.5M in profit and grew $3M in value… a total of $4.5M.
That’s $500K in tax paid on your profit and share value returns.
AKA… a net tax rate of 10%.
Hang on… wait a dang minute…
The company paid 25% tax on its profits!
But the net tax rate was only 10%?
How could this be???
Well in business you get taxed on your profit, NOT the growth in the value of your company.
So, from the example above, 67% of the net worth increase was actually tax free!
(that’s $3M in company value growth from the total post-tax sum of $4.5M)
And here’s the thing…
The example above was based on a 3X multiplier.
But I’ve seen many service-based businesses get valued at a 5X multiplier (and even higher)!
Which means even more tax-free net worth growth for you!
So, are you ready for the super-secret tax strategy of the uber rich???
Well, here it is…
Fortunes are built on appreciation, NOT income.
In fact, 94% of the Forbes 100 growth in 2022 came from appreciation, not income.
In other words…
What we build is what builds our net worth, not what we make.
Bezos… Musk… the Zuck…
They all know this.
So, they sacrifice some of their income through higher taxes on their profits to ensure their tech businesses are built in the tech entrepreneurial hub of the world… Silicon Valley!
Where the best people, assets, resources, and opportunities are, to accelerate the growth of their company’s.
The bigger they grow in value, the more wealth they build, and the greater their net worth!
So, consider taking a page from their personal tax playbook…
Rather than just looking for strategies on how to cut down your income tax…
(many can be detrimental to increasing company value)
Start focusing on building a valuable business that will grow your net worth TAX FREE.
This means ALWAYS prioritising strategies and decisions that grow the profitability and value of your business OVER ones that are 100% focused on reducing your income tax.
Your net worth will be far better off in the long run.
