We have been exploring the many benefits of Selling to an ESOP, including how Selling to an ESOP Pays for Itself, Selling to an ESOP in 2012 Increases After-Tax Proceeds by 43%, and Selling to an ESOP Enables a Business Owner to Sell In 60-90 Days.
We have previously discussed how Selling to an ESOP provides a Built-In Buyer that can purchase the company in as little as 60-90 Days. Another benefit is that the seller is allowed to sell to an ESOP for full fair market value of the company (but not more than fair market value) as determined by an independent appraiser. The protection provided by the Internal Revenue Code to engage an independent appraiser protects the ESOP participants and ensures that the full fair market value of the company is used in the determination of the sale price.
A recent article from the Human Capital Institute (HCI), "Want Trust? Be a Leader" says, “to be trusted is a greater compliment than to be loved”.
We have been discussing some of the many benefits of Selling to an ESOP including how Selling to an ESOP Creates a Built-In Buyer and how Selling to an ESOP in 2012 Increases After-Tax Proceeds by 43%. In addition to the Higher After-Tax Return, selling to an ESOP can provide additional ways to add capture additional consideration and benefits for the selling shareholder above and beyond the sale proceeds.
Small business owners continually strive to find better ways to retain and reward employees. Much can be invested over time to help create an environment of happy employees, willing to invest their best efforts each day they come to work. Yet many business owners struggle to find just the right formula to inspire their people to share in their vision for success.
When a business is sold to a third party, the buyer generally prefers to purchase a company’s assets rather than its stock for liability and tax reasons. Selling to an ESOP is always a stock sale which is more favorable from a tax standpoint than a traditional asset sale. When analyzing the purchase price, it is essential to consider the after-tax proceeds when comparing an ESOP transaction sale to a third party sale.