Thread by @XavierHelgesen

Want to build your own baby Berkshire?

I recently lifted the curtain on our unique (but old school) structure at Enduring Ventures.

Read on to learn how I plan to pay 0% cap gains, compound tax free for decades and give my investors and executives the same luxury. 👇🏻👇🏻👇🏻

As they say, good artists borrow, great artists steal.

Most of this strategy was pioneered by Warren Buffett. Who, it is worth noting, is much richer than all the private equity guys who keep saying he is old school and had lost his touch.

Five things you need to understand to build your tax efficient conglomerate:

1. QSBS
2. C Corp Dividend deduction.
3. C Corp redemptions
4. ESOPs
5. C Corp consolidation.

Sound boring? What’s not boring is Buffett’s effective 1% tax rate. Here’s how he achieved it.

1. QSBS.

If you purchase C Corp shares at “original issue” and hold them for 5 years, you pay no federal cap gains when you sell (up to first $10 million).

You can have your spouse and kids buy shares, further increasing the tax shield. ($10 million each!)

Google for details

There’s also no limit. So your parent C Corp can create subsidiary C Corps. Execs and investors and buy into these shares.

We have done two startups at Enduring Ventures. Our execs get QSBS, same as we do. So do early investors.

#2 - C Corp dividend deduction.

If one C Corp owns more than 80% of another, it can deduct the dividends received.

This is how Buffett is able to move the cash from his subsidiaries to head office and reinvest it in his highest return opportunities.

#3 C Corp Redemptions

How do you offer returns to you investors who may not want to hold forever? Easy.

Just have a structured share buyback program. Take 50% of free cash flow and repurchase shares at fair market value.

#4 ESOPs

Want to stay tax free above $10 million? Sell to your employees.

If you sell more than 30% of your C Corp to employees, you can roll your proceeds into any public or private company’s stock (eg Berkshire) and defer cap gains indefinitely.

#5 C Corp Consolidation

If a C Corp owns more than 80% of any subsidiary, it can consolidate financials.

So let’s say you have a profitable service business and a money losing startup. You can shield your profits by the startup losses.

So to pull this all together:

1. Setup parent C Corp. Founders buy all common stock.
2. Sell preferred shares to investors to raise capital
3. Buy or start companies as C Corp subs.
4. Compound.
5. Buy back shares out of cash flow from investors.
6. Much compounding

@SahilBloom , @Codie_Sanchez , @sulemanali , @ShaanVP , @theSamParr - would love your thoughts/additions.