ESOP – The Unicorn of Exit Planning.
Sell your business on your terms and timeline, create wealth for your employees, keep your culture, provide business continuity, and realize tax benefits for your family, the business, and your employees.
As a business owner, planning your exit strategy is one of the most critical decisions you’ll make.
Do you know who is going to take over when you’re gone?
Three types of buyers are probably coming to mind: family members, trusted business partners, and third-party buyers.
There’s a fourth exit path, and this road less traveled may be better than the traditional options. What is this option and is it right for you?
| HOW DO STANDARD TRANSACTION OPTIONS STACK-UP? | |||
|---|---|---|---|
| Liquidity & Diversification | Flexible Transaction | Continued Independence | |
| Internal Sale | ? | ✓ | ✓ |
| Private Equity | ✓ | ? | X |
| Strategic Sale | ✓ | X | X |
| ESOP | ✓ | ✓ | ✓ |
ESOP: Your path to a customized business exit
Employee Stock Ownership Plans (ESOPs) are a powerful alternative that allows you to exit your business on your terms while preserving your company’s legacy and rewarding your employees.
How does the ESOP work?
Your employees purchase your ownership through an Employee Stock Ownership Plan. This purchase can happen in one or multiple tranches. This can be financed through bank and/or seller financing.
What’s the point?
It’s a win for shareholders, their employees, and their company. The ESOP structure, a defined contribution plan, provides tax benefits to the seller and company – the seller can defer or eliminate taxes on the sale, and the company itself can reduce or eliminate taxes moving forward. The employee-ownership structure can help keep the business running smoothly and create large financial rewards for the employees who accumulate and grow the value of their company stock.
What’s the difference?
Although the ESOP might sound similar to selling to management, its legal structure has distinct tax advantages, there are cultural benefits for employees, and deals can happen in a quick and flexible manner compared to other traditional sales approaches.
ESOP Resources
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ESOP: The Other Liquidity Option
If you are a business owner considering your exit plan, you have probably considered selling to a small group of…
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ESOP: The Sales Process
While not the most common form of company ownership, Employee Stock Ownership Plan (ESOP)s have found a niche. According to…
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1042 Overview
Some Employee Stock Ownership Plan (ESOP) sellers are eligible to defer capital gain taxes on ESOP transactions by investing their…
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1042 Investment Details
If you think the 1042 election could be right for you, it is time to evaluate investment details. To successfully…
Is an ESOP right for you?
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Ready to chat?
Want to talk to an expert advisor? Contact Alex Faught or Michael Torney at Moneta to schedule a conversation about your specific circumstances.
