Aaron Juckett, CPA, CPC, QPA, QKA

Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

Recent Posts

ESOP vs ESPP: How Do These Employee Stock Benefit Plans Differ?

Employee stock ownership plans (ESOPs) and employee stock purchase plans (ESPPs) are both employee benefit plans that companies use to extend ownership benefits to employees. ESOPs and ESPPs both offer employers ways to help employees grow their retirement savings and build wealth.

In addition, both of these employee benefit plans can be powerful tools to promote employee engagement and a sense of shared culture and aligned values. Employees with an ownership stake in the business may be more attentive to the shared company vision and culture. That, in turn, can have positive effects on recruiting and retention, productivity, and long-term company success.

Despite their similar names, these two types of employee ownership benefits are quite different from one another. An ESOP is a qualified defined contribution retirement plan, so employees don’t purchase shares with their own money. An ESPP, on the other hand, is a plan that allows employees to use their own money to buy company shares at a discount.

How an ESOP Can Help Solve Family Business Succession Planning Problems

When it comes to running a family owned business, succession planning is an often overlooked yet essential consideration. In fact, many family companies don’t last beyond a single generation. For those that do, succession planning is a must.

But the subject of ownership transition can be thorny in a family firm, and the issue can become even more complex when some children prefer to remain involved in the business while others pursue their own interests.

ESOP Success Stories Highlight Advantages of Employee Ownership

The question of whether a business is a good fit for an employee stock ownership plan (ESOP) gets a lot of attention, but ESOP companies share another story worth telling. It’s about how transitioning to an ESOP can support many different types of businesses’ ongoing success.

ESOP Pros and Cons: Overcoming 9 Common Misconceptions

In the course of investigating exit strategies, business owners often look for a straightforward comparison of the different ways to sell a company.

Unfortunately, side-by-side comparisons are hard to come by. And, when you find them, they’re often oversimplified and even inaccurate. Besides, every business is different, and so are the needs of every seller. You may not get the answers you need.

Owners also often look to trusted advisors — attorneys, accountants, financial advisors, and other specialists — when the need to sell the business appears on the horizon. 

How Long Does it Take to Complete All the Steps for an ESOP Setup?

For many business owners evaluating exit strategy options, timing is a critical consideration.

The decision to sell to an ESOP and establish employee ownership is much more than a financial determination. An owner who chooses to set up an ESOP demonstrates a commitment to continuity, employee goodwill, and the ongoing success of the business.

Nevertheless, ESOP timing and timelines matter. A departing owner often wants to be able to predict a transition path, and employees appreciate a degree of predictability in any ownership transition scenario.

ESOP Distribution & Taxation: How Does it Work? What Are the Rules?

One of an Employee Stock Ownership Plan’s (ESOP) distinctive advantages is its value as a qualified retirement plan. Questions about how ESOP share values are distributed and taxed are important not only to ESOP companies’ leadership teams, but also to employees.

As a defined contribution benefit plan, an ESOP can be an important part of an employee’s retirement savings. For this reason, it’s vital for employees to understand the basics about taxation of ESOP distributions.

Business Exit Planning: 5 Classic Strategies + One You May Have Missed

Most business owners recognize the value of planning for building and growing a successful company.

It takes entrepreneurial thinking and strong problem-solving skills to start and grow a business, and your exit — whether for retirement or another reason — is just as important a phase in the lifecycle of your company.

As a business owner, your exit strategy plan matters not only to you and your family, but also to your employees, customers, vendors, strategic partners, and the community at large.

Some entrepreneurs include an exit strategy in their initial business plan. That’s a great idea, but it’s also vital to recognize when conditions change and other options may become more beneficial.

Creating an exit strategy business plan well in advance can give you the advantage of clarity in the planning process as you make strategic choices that can strengthen your position for a sale, merger, or other deal.

Number Nine - Benefit of Selling your Company to an ESOP










Benefit #9 of selling to an ESOP: It creates the liquidity event now. This enables shareholders to diversify and begin to access value prior to retirement. The ESOP cannot pay a synergistic premium. This enables shareholders to diversify and begin to access value prior to retirement. Selling to an ESOP is always a stock sale which is more favorable from a tax standpoint than a traditional asset sale. 

Additional key tax benefit;  The portion of a company owned by an S Corporation ESOP is not subject to. federal or state income taxation, increasing cash flow and providing the company with a competitive advantage. This means that S Corporations that are 100% ESOP-owned are not subject to any federal or state income taxes, increasing cash flow and providing the company with a competitive advantage. 

Is An ESOP Right For Your Company

Check out this brief animated video to learn more about ESOPs. 

What Are the Ongoing Duties You Should Expect for an ESOP Trustee?

A key step in the process of establishing and structuring an ESOP (employee stock ownership plan) company is identifying, vetting, and selecting a qualified ESOP trustee. 

An integral part of the ESOP Corporate Governance process, the ESOP trustee holds an essential role as the legal shareholder of the shares held by the ESOP trust. 

This shareholder position is a fiduciary role that involves numerous, critical responsibilities.

So, what are an ESOP trustee’s fiduciary responsibilities? What about other ESOP-related trustee duties?

Here, we’ll walk through the fundamental duties and responsibilities of an ESOP trustee:

  1. Satisfy ERISA fiduciary responsibilities
  2. Engage the independent ESOP appraiser
  3. Establish the annual ESOP stock price
  4. Vote ESOP shares to select the board of directors
  5. Manage assets of the ESOP trust
  6. Ensure plan documents are followed
  7. Thoroughly document decision-making processes

It’s hard to overstate the importance of choosing a qualified ESOP trustee, given the need for due diligence in every decision related to ESOP transactions. ESOP trustee responsibilities, when properly executed, ensure regulatory compliance and a healthier ESOP company. 

Number Eight - Benefit of Selling your Company to an ESOP










Benefit #8 of selling to an ESOP: It provides more ESOP after-tax payments than a sale to a third party. The ESOP cannot pay a synergistic premium. 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. In a stock sale, the seller is generally eligible for long-term capital gain treatment at the current long-term capital gains rate. The more common sale alternative, the asset sale, is generally taxed at the higher ordinary-income rate.  

Additional key tax benefit;  The portion of a company owned by an S Corporation ESOP is not subject to. federal or state income taxation, increasing cash flow and providing the company with a competitive advantage. This means that S Corporations that are 100% ESOP-owned are not subject to any federal or state income taxes, increasing cash flow and providing the company with a competitive advantage. 

Is An ESOP Right For Your Company

Check out this brief animated video to learn more about ESOPs. 

Keep Your ESOP On Track and On Time
New Call-to-action

Recent Posts