I know of one businessman who was very smart. Knowing that if he sells his company on private, would mean that he would pay l0% of the first Pl00,000, and 20% on the succeeding, he went public before disposing.
The reason for going to Stock Exchange.
l. Going public is an exit strategy. You want to liquify your holding and make you wealthier.
2. But the main compelling reason is the tax angle. Going public means you pay only l/4 of l% for capital gains. Even if you pay the broker fees, say 2 to 3%, you are still far ahead of the capital gains tax
Savings on the estate and/or donor's tax.
Ever wondered why there are so many big corporations have foundations. It is not just about being a do gooder or corporate citizen. It is about wealth preservation. A foundation as allowed by BIR (before it was NEDA l-8l) to do CSR and other social entrep projects and be tax exempt from donor's and donees tax. Now if you have an estate, when you transfer the same to your heirs, you can do any of these things:
l. Simulated sale (pay only capital gains of 7.5% to l0%)
2. Donate to heirs and pay both the donees and donor's tax (this is hefty too)
3. Or pay estate tax of up to 35% when there is a will, or the principal dies intestate.
What happens if you donate this to the foundation? How much do you pay?
Nada. Nothing. Zero.
Would you be surprised if some major companies are now owned by the foundation.?
How about control? You simply appoint yourself and your children to the foundation (they will earn salaries too). You and your foundation being a major stockholder, can still elect your own board of directors.
Pretty neat. eh....
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