Financial Planning

ESOP (Employee Stock Ownership Plans)

General Overview
An ESOP is an employee benefit plan which makes the employees of a company owners of stock in that company. Several features make ESOPs unique as compared to other employee benefit plans. First, only an ESOP is required by law to invest primarily in the securities of the sponsoring employer. Second, an ESOP is unique among qualified employee benefit plans in its ability to borrow money. As a result, "leveraged ESOPs" may be used as a technique of corporate finance.

ESOP—The Equity Advantage
As a business owner, how would you like to get some of the equity out of your business, pay no current tax on the proceeds, and retain control of the company.

Sound good?
Well, that possibility as well as many others can be realized with an Employee Stock Ownership Plan ("ESOP"). Under current law, owners who sell 30% or more of their company to an ESOP are allowed to "roll-over" the proceeds into other securities and defer taxation on the gain. ESOPs can also be used to increase corporate cash flow, to provide fully tax deductible financing for expansion, acquisition, to finance existing debt, or any other legitimate corporate purpose.

These opportunities would be more than enough to make ESOPs attractive to business owners, but they are only part of the ESOP advantage.

Now imagine what it would be like if all your employees had the same interest in the profitability and success of the company as you do.

This situation is the reality for a growing number of companies who are beginning to take advantage of ESOPs - the ability to create a workforce of "owners" whose daily activities are based on a real stake in the future of the company rather than just a paycheck.

ESOPs are not simple. No program which can do what an ESOP does could be And, the truth is ESOPs are not right for every company. If you think ESOP might be right for you, the way to find out is to talk it over with the ESOP experts.

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