ESOP Companies Can Be C Corps or S Corps
Business owners investigating an employee stock ownership plan (ESOP) have many important decisions to make—among them, whether the C corp or S corp status is best for their company. There are many tax advantages for ESOP-owned S corporations, but an S corp comes with its own limitations, too.
An S corp can only have up to 100 shareholders, and there are limits on who can own S corp stock; it can only issue a single class of stock shares. In addition, certain circumstances could lead to a C corp realizing tax savings.
Conversion from C corp to S corp is often part of a transition to employee ownership, but as stated above, tax law can be complex. Due diligence and consultation with a trusted team of experts is key to establishing an ESOP-owned company on a solid foundation to support ongoing success.
Business owners who are investigating exit strategies and looking for greater control over their exit timeline along with flexibility in structuring the sale transaction are often drawn to employee ownership as a succession planning strategy. In some cases, that can also call for conversion from C corp to S corp.
Learn more about how employee ownership can offer advantages to business owners, employees, and even the communities where they do business. Download our eBook, Key Benefits of Incorporating an ESOP in Your Business Exit Strategy, today. Click the link below to claim your copy.