Employee Benefits Law Blog
I was recently talking with a business owner about whether an ESOP made sense for his company, and he asked a great question: Am I smart or crazy to even consider this? Honestly, that’s exactly the right place to start.
The truth is, an ESOP can be a very smart move but it is definitely not the right move for every company. For the right business, it can be a powerful succession planning tool that rewards employees and preserves the company’s legacy. For the wrong business, it can create unnecessary complexity and frustration.
An ESOP may be worth a serious look if a business has these ...
Owners usually ask this sooner or later: “Great, so what does an ESOP do for my taxes?” Depending on your entity type, the answer can be “a lot.” Employee Stock Ownership Plans (ESOPs) offer tax advantages that most third-party buyers simply can’t replicate.
1) If you’re a C-Corp: Sell at least 30% of your stock to an ESOP and you may be able to defer capital gains by reinvesting proceeds into certain qualified replacement securities. There are rules and timing requirements (it’s tax law), so get good legal counsel—but when structured correctly and held long term ...
