Help a Dorklehead understand

[TheVTCGuy]

I have heard several times on here, that Rolex, the company, is a NOT FOR PROFIT organization. Now, My financial knowledge is slightly better then a horned frog, I can barely balance my checking account, but a couple things I DO know is without being a public company, Rolex does not have to report to stock holders. I also know that Rolex HAS to make a profit… I mean to pay it’s workers and pay for supplies and bills…. And… stuff.

So…exactly what does Rolex gain by being a “Not for Profit” Organization, what does it really mean?

[cornerstore]

All about taxes and philanthropy.

1945: Hans Wilsdorf Foundation

In 1945 Wilsdorf established the Hans Wilsdorf Foundation. In 1960 he gave his 100% ownership stake in Rolex to the foundation. The Hans Wilsdorf Foundation owns and controls Rolex to this day, and donates much of its income to charity and social causes in Geneva, Switzerland.

Since Rolex is a foundation under Swiss law, all profits from Rolex are tax-free. All of Rolex's excess profits are directly put into the foundation. Rolex has a profit of about 1 billion Francs per year with a net profit margin of about 20% (of course varying from year-to-year).

[toolr]

What's a Dorklehead?

[TheVTCGuy]

Originally Posted by toolr

What's a Dorklehead?

A person who’s head Dorkles a lot

[burnthesehills]

I have to assume that Rolex employees enjoy good pay and benefits with the higher ups enjoying massive salaries, bonuses, incentives, etc. Just like a normal company. However the “profits” realized by the company are given to charitable causes. That is my take but I am sure it is much more complicated.

[chro.nic]

Rolex is owned by a non profit organization!!

.nic

[WatchGuy1966]

It's not that simple.

Nonprofits are formed explicitly to benefit the public good; not-for-profits exist to fulfill an owner's organizational objectives. Nonprofits can have a separate legal entity; not-for-profits cannot have a separate legal entity.

However, Rolex SA is owned by the Hans Wilsdorf Foundation, which a charitable foundation. It's a "non-profit."

BTW, Payroll, Rent, Cost of Goods, Distribution, and a host of many other things are considered before there is a net. That net is "Gross Profit"

Some more folks will be along shortly to explain further, tease you, and unfortunately talk down to you as if you were dumber and simpler than a mere Dorklehead.

[Avs Fan]

Well, non-profits have expenses just like any other company. Wages/salaries, supplies and other expenses all occur above the line.

[inadeje]

It’s nothing more than a tax shelter of the most intricate kind. Usually, Family, friends, etc are all executives and salaried with healthy allowances. Homes, cars, etc all owned by the foundation. It’s how wealth in perpetuity is built, not unlike monarchy or other schemes to mitigate tax erosion. Foundations are pretty common these days, and if one chooses the right jurisdiction, one can shield assets very well indeed. Mr Wilsdorf was a very bright man and knew how to ensure perpetual generational wealth while keeping the tax man at bay.

[csaltphoto]

Originally Posted by inadeje

It’s nothing more than a tax shelter of the most intricate kind. Usually, Family, friends, etc are all executives and salaried with healthy allowances. Homes, cars, etc all owned by the foundation. It’s how wealth in perpetuity is built, not unlike monarchy or other schemes to mitigate tax erosion. Foundations are pretty common these days, and if one chooses the right jurisdiction, one can shield assets very well indeed. Mr Wilsdorf was a very bright man and knew how to ensure perpetual generational wealth while keeping the tax man at bay.

Something like this. Non-profits certainly can make a profit (I've worked for a few). But those profits are not distributed to shareholders and they can't sell shares. But they can invest in their own infrastructure, invest financially and so on. Since they technically don't declare a "profit" they aren't taxed on revenue over expenses. Excess money gets reinvested, used for some charitable work to keep appearances up and so on. They do pay things like payroll taxes, taxes on profits from investments if they are sold and so on.

[DonRickles]

Profit, is for the greys silly......

[Wcdhtwn]

Paying workers, supplies and bills, are factored in before it’s “profitable”. Also known as business expenses…

[77T]

Originally Posted by TheVTCGuy

So…exactly what does Rolex gain by being a “Not for Profit” Organization, what does it really mean?

Protection primarily.
Because Swiss law protects foundations from prying tax moles, the Hans Wilsdorf Foundation allowed Hans to transfer 100% of Rolex and avoid the taxes on profits. Also, being
owned by a foundation it can’t be sold or split up into different companies.

Good Works secondarily.
The Foundation mostly finances all or part of several interests like food banks, elderly charities, scholarships, school prizes, public works, infrastructure, and the reduction of excessive debt for other good causes.

You should look into a foundation for Anna’s benefit against future deflationary conditions…ahem…


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[Watchsprings]

Definitely a tax shelter. Also not for profit companies invest their earnings back into the business. You know build a 1 billion dollar factory and little things like that with their pocket change….

[Guppydriver]

Hell, the NFL was a non profit up until 2015.

It's all about taxes, everything else is cursory.

[Old Expat Beast]

Having no kids, I suppose this was as close as he could get to keeping it in the family. I believe I read somewhere that there are still one or two other shareholders taking a small cut, possibly from brother-in-law and early partner Alfred Davis' family and/or another of his early partners who owned a piece of the business, but don't quote me on that.

[Moondoggy]

Non for profit is after they have paid those who want to be paid. I am non for profit after I have paid myself handsomely.

[Polar Bear]

As others have said, it also makes Rolex the company "take over proof" and allows them to maintain their independence

They would have, likely, become part of the Swatch Group by now if it wasn't for that

[padi56]

Rolex is a foundation and cannot be owned, bought or sold to anyone for any price. The company is set up in such a way that it continuously perpetuates its existence through properly allocated funds into research and development but they do still make a large profit just like any other business to survive.

Hans Wilsdorf, the founder of Rolex, was orphaned at age 12,he spent the rest of his teenager years in an orphanage. He later began to work for a watch exporter in Switzerland, then went on to found RWC now just Rolex as we know it today.

Hans Wilsdorf and his wife owned orphanages in Switzerland and donated profits of the company to various charities and orphanages. To this day a large share of the profits go to charities and the Rolex Awards for Enterprise but they still make a large profit .

[ROLEX MAN]

Non profit = non tax!

[rlx123]

Originally Posted by inadeje

It’s nothing more than a tax shelter of the most intricate kind. Usually, Family, friends, etc are all executives and salaried with healthy allowances. Homes, cars, etc all owned by the foundation. It’s how wealth in perpetuity is built, not unlike monarchy or other schemes to mitigate tax erosion. Foundations are pretty common these days, and if one chooses the right jurisdiction, one can shield assets very well indeed. Mr Wilsdorf was a very bright man and knew how to ensure perpetual generational wealth while keeping the tax man at bay.

I have not heard of any specific charity that Rolex is supporting.


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[enjoythemusic]

Originally Posted by padi56

Rolex is a foundation and cannot be owned, bought or sold to anyone for any price. The company is set up in such a way that it continuously perpetuates its existence through properly allocated funds into research and development but they do still make a large profit just like any other business to survive.....

Thanks Padi for another excellent and informative post

[Driver8]

It’s all been said above, but I just thought I’d share something an extremely well respected watch industry insider told me. He told me that apart from making watches, Rolex is a vast property and landowner, and they could literally close the doors on their watch-making business tomorrow and still make a truly huge profit from their real estate interests alone.

As others have said, non-profit doesn’t mean you can’t make a surplus - it just means there’s no shareholders to pay, so all that surplus income has to go somewhere. Apparently charitable causes are one recipient (although I can’t find any direct evidence of who they support), and real estate is another.

[garyk]

Originally Posted by TheVTCGuy

A person who’s head Dorkles a lot

Somehow I knew you were going to say this….

[TheVTCGuy]

Originally Posted by garyk

Somehow I knew you were going to say this….

[Tricolore66]

It’s a foundation, not a non-profit. The function of a foundation is be able to exist in perpetuity. There’s a lot of profit involved in making that happen.

Originally Posted by chro.nic

Rolex is owned by a non profit organization!!

.nic

[Oystersteel92]

Originally Posted by csaltphoto

Something like this. Non-profits certainly can make a profit (I've worked for a few). But those profits are not distributed to shareholders and they can't sell shares. But they can invest in their own infrastructure, invest financially and so on. Since they technically don't declare a "profit" they aren't taxed on revenue over expenses. Excess money gets reinvested, used for some charitable work to keep appearances up and so on. They do pay things like payroll taxes, taxes on profits from investments if they are sold and so on.

The town I used to live in had a large regional hospital that was "non-profit" but of course they made tons of money. They were constantly remodeling or building new facilities because the money had to go somewhere.

[RyanJ]

Originally Posted by inadeje

It’s nothing more than a tax shelter of the most intricate kind. Usually, Family, friends, etc are all executives and salaried with healthy allowances. Homes, cars, etc all owned by the foundation. It’s how wealth in perpetuity is built, not unlike monarchy or other schemes to mitigate tax erosion. Foundations are pretty common these days, and if one chooses the right jurisdiction, one can shield assets very well indeed. Mr Wilsdorf was a very bright man and knew how to ensure perpetual generational wealth while keeping the tax man at bay.

This is exactly it. Just another marketing, but very legal, ploy by Rolex to make people think they care nothing about making money. Rolex SA and Tudor SA are 100% for profit businesses that are owned by a foundation / charitable trust.

Due to this, I do not think the foundation has to disclose anything about their financials. Not saying they don't donate to charity or there is anything nefarious going on. Many many companies have a charitable arm so Rolex is not doing anything new here.

[Robf52]

I've also read that the Hans Wilsdorf Foundation is the largest land owner in Switzerland. Hans did well.

[miamiclay]

Originally Posted by csaltphoto

They do pay things like payroll taxes, taxes on profits from investments if they are sold and so on.

US nonprofits (i.e., 501(c)(3)s) do indeed pay payroll taxes, but (subject to the usual baker’s dozen exceptions, exemptions, and “it depends”) they do not pay US capital gains taxes on profits from sale of investments.