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What is an ESOP?

An ESOP is a qualified retirement plan designed to invest primarily in the stock of the sponsoring employer. For owners of closely-held companies, an ESOP is a succession planning tool […]

Step 1:   The company borrows money from a third party lender (the “Outside Loan”) Step 2:     The company loans the money to the Employee Stock Ownership Plan (the “ESOP”) […]

Step 1:   Similar to contributions to other retirement plans, the company makes a tax-deductible annual contribution (and dividend, possibly) to the ESOP Step 2:   Immediately after receiving the […]

Board of Directors:  Under state law, a corporation’s authority vests in its board of directors.  Other than a duty to appoint fiduciaries of the plan and the duty to monitor […]

Enterprise value Historical and projected performance Current industry trends Current economic trends Shareholder compensation Non-recurring expenses Weighted average cost of capital Change in working capital Depreciation and amortization Capital expenditures […]

How are ESOPs financed?

The table below illustrates the various financing sources available for ESOP transactions     This chart illustrates the amount of debt that is typically available to companies considering an ESOP: […]

Pre-Tax LBO Tax Deductible Interest Tax Deductible Principal Tax-Free Stock Sale C Corporation Only Section 1042 Like Kind Exchange Transferred Basis in QRP Tax-Exempt Corporation S Corporation Only No Tax […]

How Are Key Employees’ Interests Aligned?

Stock Appreciation Rights Similar to Non-Qualified Stock Options Cashless Exercise Settled in cash, not stock, when exercised Additional incentive for key employees Can be based on retention or performance Portion […]


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