S-corp wholly owned by an ESOP pays 0% federal income tax — ESOP is tax-exempt, S-corp income flows to it.
An S-corp 100% owned by an Employee Stock Ownership Plan (ESOP) pays ZERO federal income tax because (1) S-corp income flows to shareholders, (2) the sole shareholder is a tax-exempt trust. This is arguably the single largest legal tax loophole for operating businesses. Existing owners can sell to the ESOP (leveraged buyout via bank + seller notes), defer their gain via §1042 rollover (for prior C-corp) or ordinary S-corp installment sale, and the company operates federally tax-free thereafter — with employees as beneficial owners. Combines with warrants for departing sellers.
Click Generate advisory deep dive for mechanics, IRC citations, a step-by-step execution plan, a worked numeric example on your profile, costs, risks, and this-week actions.
Multiply the $10M §1202 exclusion across multiple trusts.
4% corporate tax + 0% capital gains for bona fide residents.
Stack the $500K primary-home exclusion on top of a 1031 deferral.
Convert Traditional to Roth during sabbaticals or business-loss years.
Capitalize property taxes and interest on undeveloped land.
Deduct now, control forever, employ heirs.
Ordinary loss (not capital loss) on failed small biz — up to $100K.
Buy leveraged real estate inside your IRA — tax-deferred or tax-free.