Alex Hormozi: How wealthy people avoid paying taxes..my new plan

Last updated: Jun 15, 2023

The video discusses how business owners can get paid tax-free through the use of debt, rather than selling their business, which can result in high taxes and a lower net worth.

This video by Alex Hormozi was published on Nov 26, 2021.
Video length: 08:09.

In this video, Alex Hormozi explains how business owners can get paid tax-free without giving up any equity by using debt.

He uses the analogy of a house to explain how business owners can split their business into equity and a loan, allowing them to share the risk and receive tax-free income.

Hormozi emphasizes that this strategy can help business owners avoid the high taxes associated with selling a business and keep more of their net worth.

  • Business owners can get paid tax-free without giving up equity by using debt.
  • Debt can be used to share the risk of the business with others.
  • Using debt can be a better option than selling the business, which can result in high taxes and a lower net worth.
  • The loan against the business is not income, which means it is tax-free.
  • A house analogy is used to explain how debt can be used to finance a portion of the business.

How wealthy people avoid paying taxes..my new plan - YouTube

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Introduction

  • Alex Hormozi explains how business owners can get paid for their business tax-free without giving up any equity.
  • He owns Acquisition.com and a portfolio of companies that generate about $85 million a year.
  • He wants to share his knowledge about debt and how it is used in mergers and acquisitions.
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Why Business Owners Want to Sell Their Business

  • Many business owners want to exit their business because it seems like a big aspirational goal.
  • However, the reality of the exit is not nearly as inspiring as the story of the exit.
  • Transition documents, earn outs, seller financing, equity roll, cash, bonuses, distributions, financing costs, and transaction costs are all involved in the exit process.
  • After paying taxes, the business owner may be left with a lower net worth than expected.
  • The wealthiest people in the world buy and build, and most times they don't sell.
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How to Get Paid or De-Risk

  • The majority of a business owner's net worth is in their business, which is a high-risk asset class.
  • Business owners can share some of that risk with other people by using debt.
  • Debt can be used to finance a portion of the business, which can be paid back over time.
  • The loan against the business is not income, which means it is tax-free.
  • Business owners can keep a portion of the business and get a loan for the rest.
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How wealthy people avoid paying taxes..my new plan - YouTube

An Analogy: A House

  • A house can be built without land, using only the owner's money.
  • Once the house is built, tenants can be added to generate cash flow.
  • The owner can get a loan in the form of debt to finance a portion of the house.
  • The loan against the house is not income, which means it is tax-free.
  • The owner can keep a portion of the house and get a loan for the rest.
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The Benefits of Using Debt

  • Using debt allows business owners to get paid tax-free without giving up any equity.
  • Debt can be used to share some of the risk of the business with other people.
  • Business owners can keep a portion of the business and get a loan for the rest.
  • The loan against the business is not income, which means it is tax-free.
  • Using debt can be a better option than selling the business, which can result in high taxes and a lower net worth.
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How to Get Paid Tax-Free Through Debt

  • Through debt, business owners can get a loan and still own the business.
  • Business owners can grow their business and the loan at the same time.
  • Business owners can own the delta, which increases their net worth.
  • There are many ways to take out debt in the company, such as minority, majority, and dividend recap.
  • Business owners can refinance at regular intervals as the value of the business grows.
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Why Taking Loans Against Equity is Beneficial

  • CEOs of publicly traded companies live off of loans that are asset-based.
  • Stocks grow tax-free because they compound, and loans are locked in.
  • Business owners can gain money without paying income tax on the loans they took against their assets.
  • Business owners can de-risk themselves and put their money in other assets.
  • Taking loans against equity is a way to grow net worth faster in a lower risk environment.
  • Business owners can take loans against equity to redeploy it and do other things.

Watch the video on YouTube:
How wealthy people avoid paying taxes..my new plan - YouTube

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