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. 

The Steps to Launching and Relaunching Your ESOP

You’ve sold your company to an ESOP. Now what? The way in which you launch your company’s ESOP can have lasting effects on the success of the ESOP and the buy-in and dedication of the employees. It is even beneficial to complete relaunches annually. The launch and subsequent relaunches should occur in a similar sequence every time.

How to Successfully Launch Your ESOP

Over the next several weeks, we will be completing a series of blog articles on how to correctly launch and relaunch your company’s employee stock ownership plan.  This will require some strategic planning, which should not be confused with a business plan.  The major fundamental difference between the two is a business plan is about short to mid-term goals and strategic goals are about long-term goals for the company’s success. 

Four Expectations and Guidelines for Remote 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. 

An ESOP is a Qualified Retirement Plan


An ESOP is a Qualified Retirement Plan 

ESOP stands for Employee Stock Ownership Plan.  An ESOP is a qualified retirement plan that can be used as a business transition tool and as an employee ownership vehicle.

An employee stock ownership plan (ESOP) is an IRS qualified retirement plan, similar to a 401(K) Plan, that buys, holds, sells company stock, providing employees with an ownership stake in the company, as well as an additional form of compensation directly linked to success of the company. 

  •  ESOPs and 401(k) plans are both tax deferred retirement plans that are funded by pre-tax contributions.
  • While 401(k) Plans are funded with employer and employee contributions, most ESOPs are funded exclusively with company contributions. This means that most ESOPs are provided by the company at no cost to the employees.
  • While 401(k) Plans are invested in stock and bonds and other investments, ESOPs are the only retirement plan that is allowed to be primarily invested in employer securities of the company.
  • While 401(k) Plan account values are generally updated on a daily basis based on the results of the stock market, ESOP account values are generally updated once per year. This is because most ESOPs own privately held stock.  Since there is not a stock market for privately held stock, the ESOP trustee has to obtain a valuation from an independent appraiser once per year.
  • A leveraged ESOP is the only retirement plan that is allowed to borrow money. It is also the only retirement plan allowed to enter transactions with “parties-in-interest” (e.g. the company, owners).  These special ESOP rules allow ESOPs to be able to purchase stock from the company or owners of the company.

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

Did  you know? Employee Owned Companies are 235% Better at Job Retention!  

Keep Your ESOP On Track and On Time
12 Benefits of Incorporating an ESOP in your Business Exit Strategy

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