ESOP – Broad in Scope and Highly Effective

Posted on June 11, 2012 · Posted in Blog

The benefits of an ESOP (Employee Stock Ownership Plan) are broad in scope and can benefit many business owners looking to exit their companies.

An ESOP transfers the ownership interest in a company to the employees and is a highly effective liquidity and diversity strategy.  There are many tax incentives and deferments that can make an ESOP an effective strategy.  Under the right circumstances the structure will create benefit to the owners, the buyers, and the existing employees.

Many small business owners believe now is the right time to consider selling their companies.   Capital gains will be increasing, the economy is slowing and there is worldwide uncertainty.  ESOPs allow the partial selling of stock and provide an excellent opportunity to sell while in some cases still maintaining some control.

For example, an Architectural firm with aging partners nearing retirement can utilize an ESOP to transfer ownership to the employees.  The structure will enable the owners to sell their interest and defer capital gains taxes.  The employees can purchase the interest with pre-tax dollars and create a “win-win” transaction for both sides.

Let us know if you would like to receive additional information on ESOP options available to you.

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