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