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 ...
The short answer is YES! Here’s the plain‑English, straightforward version of how an ESOP works as a succession strategy:
1. The company sets up an ESOP trust.
2. That trust then buys some or all the owner’s stock.
3. Employees earn shares over time as a retirement benefit.
4. The company keeps operating - same management, same board.
5. Finally, instead of having to sell the business to a competitor, or shutting the doors completely, the owner ultimately sells to the people who helped build the business.
Sounds great, so what’s the catch? There is fine print and I wouldn’t be ...
You can probably picture it now: some employees are chatting and out of nowhere, someone blurts that out. Most employers would immediately tense up. Maybe HR gets a phone call, and everyone is now in damage control mode.
But that’s not what happened at one of my ESOP (Employee Stock Ownership Plan) companies. In fact, the company president later said it was one of the best things that could have happened and here’s why.
The comment came up when a retired employee stopped by to attend the company’s annual share release party. ESOP statements were handed out, and as the retiree looked ...
When most business owners start talking about “succession,” it sounds like a financial term. But if we’re honest, it rarely feels that way, it feels more personal.
It feels like sitting at the kitchen table late at night, staring at numbers, and realizing this thing you built, isn’t just a business anymore. It’s the crew who showed up when you only had a used van and a couple pieces of old equipment. It’s the office manager who’s been there 30 years and knows more about the place than you do. It’s the technician who bought his first house because this company gave him steady ...
On January 15, 2026, the U.S. Department of Labor’s Employee Benefits Security Administration (“EBSA”) announced a major update to its national enforcement projects for fiscal year 2026. The changes are intended to focus enforcement resources on areas that pose the greatest risk to plan participants and beneficiaries, while reducing emphasis on minor or technical compliance issues.
According to the Department of Labor, this is the most significant revision to EBSA’s enforcement framework in recent years. The goal is to make investigations more efficient and ...
