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ESOP Resources

ESOP financing can provide significant tax benefits. Outlined below are a range industry associations and recently published articles that provide additional information about ESOP transactions, and highlight some of the advantages. Click on each link to access more detailed information.

Resources from ESOP Industry Associations

The National Center for Employee Ownership (NCEO) 

A self-sustaining nonprofit membership organization that provides practical resources and objective, reliable information on employee stock ownership plans (ESOPs), equity compensation plans, and ownership culture. Learn more >

The ESOP Association

A national non-profit membership organization serving approximately 2,800 employee stock ownership plan (ESOP) companies, professionals with a commitment to ESOPs, and companies considering the implementation of an ESOP.  The Association’s focus is on preserving and promoting employee stock ownership through the ESOP structure. Enhancing laws before Congress and regulatory agencies that govern ESOPs and providing its members with expert educational ESOP programming and information are its main concentrations. Learn more >

Resources from The ESOP Group at UBS Financial Services Inc.

Employee Stock Ownership Plans In Brief

An ESOP is a formal arrangement in which employees gain ownership in the company. ESOPs can be viable liquidity alternatives to sell-side M&A, recap, or IPO transactions, and can be structured in different ways to meet a client’s objectives. Learn more >

ESOPs: Possible Strategies for Closely Held Business Owners

Employee Stock Ownership Plans (“ESOPs”) can provide tax efficient estate planning opportunities for closely held business owners by creating liquidity for their shares and business succession options for their families and employees. Learn more >

ESOPs and Estate Planning After the American Taxpayer Relief Act of 2012

The American Taxpayer Relief Act of 2012 (ATRA), which was signed into law on January 2, 2013, permanently reunified the estate and gift tax exemptions and set the gift, estate, and generation-skipping transfer (GST) tax exemptions at $5 million (adjusted for inflation). Learn more >

Internal Revenue Code Section 1042

Internal Revenue Code of 1986, as amended (Code), section 1042, allows an owner of a closely-held C corporation to defer, or potentially eliminate, capital gains taxation on “qualified securities” he or she sells to an employee stock ownership plan (ESOP) if the taxpayer reinvests the sale proceeds into “qualified replacement property” (QRP). Learn more >

Why Business Owners Choose ESOPs

Since many businesses cannot afford to carry the amount of debt needed for a 100 percent buyout, a series of transactions may be the best approach. The ESOP can be used as an intermediate or long-term exit strategy. Learn more >

Resources from Stout Risius Ross (SRR)

Strategic Alternatives for Partially-Owned ESOP Companies

Andrew S. Ward and Isaiah Aguilar, Fall 2014

Partially owned ESOP companies have a multitude of available alternatives when it comes to future ownership. Increasing or decreasing employee ownership can be achieved in a number of different ways, each of which needs to be considered carefully. Learn more >

Private Equity and ESOPs: A Creative Combination

Matthew J. Hricko, Fall 2013 SRR Journal

As financial sponsors seek new ways to put money to work and monetize existing investments, ESOPs have emerged as a tax-efficient co-investment and exit strategy for private equity firms. As a co-investment opportunity, the ESOP structure in combination with subordinated notes, synthetic equity, and the significantly enhanced cash flows, can provide a financial sponsor with a higher return on investment relative to a traditional leveraged buyout structure. On the sell side, the total consideration paid by an ESOP can be as competitive as other financial buyers and works well where other exit strategies may be too challenging to execute efficiently. Learn more >

Defer or Eliminate Capital Gains Taxes by Selling Your Company to an ESOP

Mark R. Fournier, Spring 2013 SRR Journal

In the right circumstances, ESOPs are an advantageous succession planning tool that provides a number of benefits over more traditional succession planning techniques. During this period of rising taxes, especially increasing taxes on capital gains, the sale of stock to an ESOP can both create a liquidity event for the business owner(s) and dramatically minimize the tax consequences of a transaction of stock relative to other typical liquidity events. Learn more >

Why Architecture and Engineering Firms Make Great ESOP Candidates

Matthew J. Hricko, David Solomon, and James Staruck, Fall 2011

The architecture and engineering industry is highly fragmented and made up of mostly mid-size privately held businesses. In many cases, as the majority of shareholders approach retirement age, they are required to consider exit strategies, some of which have unwanted tax and operational impacts on the ongoing business. An Employee Stock Ownership Plan is a tax advantageous structure that provides indirect employee ownership while allowing the founders a flexible structure to exit the business under their desired timeline. Due to the high payroll levels and need to attract and retain talent, architecture and engineering firms have unique characteristics that make them well suited for employee ownership. Learn more >