Is an ESOP right for your company?
10/2/2019Businesses in every industry are looking to Employee Stock Ownership Plans (ESOPs) to help with succession planning. There are nearly 7,000 employee-owned companies in the United States with 250+ new ESOPs formed each year. Benefits include:
1. Increased employee loyalty – Employees are typically more motivated when they have a stake in performance
and profits.
2. Smoother transitions – With Baby Boomers retiring and transitioning businesses, selling to an ESOP may offer
more stability compared to mergers and acquisitions.
3. Tax benefits – ESOPs offer advantages such as deferred or reduced capital gains and income taxes in many cases. Additionally, employers’ contributions to the plan are tax-deductible and employees’ earnings from the plan are tax-deferrable.
If you are considering an ESOP, a feasibility study is a good first step. The study looks at the size and annual revenue of your company, along with the transition fees, to help determine if an ESOP is right for your company.