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.

How an ESOP Helps You Offer Employees a Distinctive Qualified Retirement Plan

The competition to attract and retain the best talent possible is fierce and global — in every industry, and for businesses of all sizes.

Companies need to consider every angle to recruit and retain employees. 

Compensation is always an important consideration, and attractive retirement benefit plans are an important part of any competitive compensation package.

That’s just one more way an ESOP can help lend businesses a competitive advantage: An ESOP is a qualified retirement plan.

Recruiting Advantages as an Employee Owned Company

The landscape in today’s job market for hiring companies is difficult, especially with the unemployment rate at 6%, according to the Bureau of Labor Statistics. Unemployment rates reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic. Job growth was widespread in March, led by gains in leisure and hospitality, public and private education, and construction. The rate is down considerably from its
recent high in April 2020 but is 2.5 percentage points higher than its pre-pandemic level in February
2020. 

Number Six - Benefit of Selling your Company to an ESOP










Benefit #6 of selling to an ESOP: It preserves the company's legacy and values in the local community by creating wealth and sustainable employment through employee ownership. ESOPs reward employees by providing them with an ownership stake in the company they work for and help build. It allows the transfer of ownership to employees at no cost and provide employee ownership without the need for employees to have or raise capital. In some cases, an ESOP can be an attractive succession option for family-owned businesses. 

Did you know? Employee-owned companies are 235% better at job retention. (NCEO)  

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. 

Number Five - Benefit of Selling your Company to an ESOP










Benefit #5 of selling to an ESOP: It improves company performance by aligning the financial objectives of the company and employees and establishing an ownership culture. ESOPs reward employees by providing them with an ownership stake in the company they work for and help build. It allows the transfer of ownership to employees at no cost and provide employee ownership without the need for employees to have or raise capital. Building an ownership culture by combining meaningful employee ownership and participative management creates a greater sense of pride for the employees, increased engagement and a competitive advantage for a company. Did you know? Employee-owned companies are 235% better at job retention. (Source: NCEO, 2018)  

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. 

Number Four - Benefit of Selling your Company to an ESOP







 



Benefit #4 of selling to an ESOP: It provides employee ownership as an additional employee benefit to help recruit and retain employees. ESOPs reward employees by providing them with an ownership stake in the company they work for and help build. It allows the transfer of ownership to employees at no cost and provide employee ownership without the need for employees to have or raise capital. Building an ownership culture by combining meaningful employee ownership and participative management creates a greater sense of pride for the employees, increased engagement and a competitive advantage for a company. Did you know? Employee-owned companies are 235% better at job retention. (Source: NCEO, 2018)  

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. 

Number Three - Benefit of Selling your Company to an ESOP







 



Benefit #3 of selling to an ESOP: The 25% of eligible compensation tax deduction provides the funding for the ESOP transaction expenses.  An ESOP is one of the most cash and tax-efficient succession plans available to business owners. The ESOP trust is an S Corporation shareholder that is a tax-exempt entity not subject to income taxes. S corporations are pass-through entities that pass through their corporate income to their shareholders for federal and state income tax reporting purposes. Each year the shareholders receive an IRS Form K-1 and report the flow-through of the income on their personal tax returns based on their individual federal and state income tax rates.

Note; 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. 

Number Two - Benefit of Selling your Company to an ESOP





 

 

 

 

Benefit #2 of selling to an ESOP: The annual company tax and cash flow savings are greater than the annual ESOP expenses.  An ESOP is one of the most cash and tax-efficient succession plans available to business owners. The ESOP trust is an S Corporation shareholder that is a tax-exempt entity not subject to income taxes. S corporations are pass-through entities that pass through their corporate income to their shareholders for federal and state income tax reporting purposes. Each year the shareholders receive an IRS Form K-1 and report the flow-through of the income on their personal tax returns based on their individual federal and state income tax rates.

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. 

Number One - Benefit of Selling your Company to an ESOP





 

 

 

 

Benefit #1 of selling to an ESOP: The sale of the company to the ESOP is being paid for by the company tax and cash flow savings over time.  An ESOP is one of the most cash and tax-efficient succession plans available to business owners. 

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. 

Common Challenges of Remote Work and Four Solutions for Employees

When unforeseen changes in our country occur, like a widespread pandemic,  many employee-owned companies now have employee owners working from home. I am sure everyone has a lot of questions about how to manage a remote workforce and maintain productivity during uncertain times. 

Keep Your ESOP On Track and On Time
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