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.
We have been exploring how an ESOP can be a key component of your Business Succession Plan. Selling to an ESOP helps the business owner Maximize the After-Tax Proceeds, Providing the Greatest After-Tax Return while at the same time Increasing the Cash Flow of the Company by Eliminating the Company’s Ongoing Income Tax Obligation. In other words, the tax savings for Incorporating an ESOP in your Business Succession Plan will provide the funding for the sale of the company to the ESOP.
We have been discussing how the recent ESOP Economic Performance Survey (EPS) revealed that 93% of ESOP companies found that establishing an ESOP was “a good business decision that has helped the company.” While there are many reasons for this, one of the significant reasons is because S Corporation ESOP companies are not subject to income taxation (federal and most states), increasing cash flow and providing the company with a competitive advantage. Yes, you read that right, S CORPORATION ESOP COMPANIES ARE NOT SUBJECT TO INCOME TAXATION!
The results of the ESOP Economic Performance Survey (EPS) were released last week – 93% of ESOP companies found that establishing an ESOP was “a good business decision that has helped the company.” If a business owner is interested in preserving the long-term success of the company and its employees after he/she leaves or sells the company, this is a pretty strong indicator that an Employee Stock Ownership Plan (ESOP) would be an ideal way to accomplish that objective.
When a business is sold to a third party, the buyer generally prefers to purchase a company’s assets rather than its stock, whereas the seller would rather sell the stock. The decision of asset sale or stock sale is often subject to the negotiation process and is an important consideration when developing your business exit strategy.
Retaining a valuable employee is one of the bigger challenges a small business owner will have to find a solution to in order to achieve long-term success. Much is invested in both time and money to recruit and train good employees. So what exactly does it take to attract and retain a good employee today?
To complete my blog series on ESOP distributions, today I’d like to discuss the methods of distributions available to ESOPs. For information on Timing of ESOP Distributions and Forms of ESOP Distributions, please visit my previous blog posts.
A recent article from the Human Capital Institute (HCI), "Want Trust? Be a Leader" says, “to be trusted is a greater compliment than to be loved”.
Now that we are mid-way through 2012, I thought it would be a good time to write a series of blogs on ESOP Distributions, as most calendar year plans are in, or will soon be in, their ESOP distribution processing season.
Small business owners continually strive to find better ways to retain and reward employees. Much can be invested over time to help create an environment of happy employees, willing to invest their best efforts each day they come to work. Yet many business owners struggle to find just the right formula to inspire their people to share in their vision for success.
