What are the Key Benefits of an ESOP?
Business owners are constantly seeking innovative strategies to fuel growth, enhance employee engagement, and secure the long-term success of their businesses. An ESOP stands out as a powerful option that can offer substantial benefits to the business and its employees.
For the Business:
- Flexible transaction structures
- Partial or complete exemption from corporate income taxes for S-Corps
- Increased employee engagement and retention
- Ability to maintain control, continuity, and culture
For Employees:
- Valued retirement benefit at no cost
- Opportunity to accumulate wealth and benefit financially from the company’s growth and profitability
- Greater sense of job security, particularly during challenging economic periods
Is an ESOP the Right Option
for My Company?
ESOPs have gained popularity in various industries, including construction, government contracting, manufacturing and distribution, and professional services. However, an ESOP is not a universal solution for all companies or selling shareholders. To assess its suitability, factors such as the company’s financial stability, long-term goals, employee culture, and the owner’s desire for liquidity or an exit strategy should be carefully evaluated. These considerations will help determine if an ESOP aligns with the objectives of the business owner and the specific circumstances of the business.
The ESOP Advantage: Secure Your Future, Empower Your Team
Unlock business prosperity and heightened employee engagement with our expert-guided ESOP solutions. Connect with SC&H Capital today to explore your specific needs, gain valuable insights, and determine if an ESOP is a perfect fit for your personal and business objectives. No obligations, just possibilities for success.
Why Do Business Owners Often
Consider an ESOP?
There are many reasons why business owners pursue ESOPs as an ownership transition and liquidity strategy including:
- Potential for significant tax benefits including deferral of capital gains tax and reduction of corporate income tax
- Unable or unwilling to go through a traditional sale of the business to a competitor or other third party
- Looking to sell a portion of the business while maintaining control
- Current management team lacks the financial resources to purchase the business outright
- Looking to provide employees with the economic benefits of stock ownership as a reward and incentive
- Difficulty identifying viable third-party buyers
Our Areas of Expertise
Our specialized professionals serve ESOP clients across the country, assisting plan sponsors and trustees in establishing and maintaining well-designed ESOPs spanning:
Pre-ESOP Planning
- Assessment of strategic alternatives
- Preliminary valuations for shareholders to understand a company’s fair market value
- ESOP feasibility studies
- Debt financing analysis
ESOP Transaction Structuring Advisory and Negotiation Assistance
- Shareholder/Board advisory and investment banking services
- Transaction valuations and fairness opinions on behalf of plan trustees for purchases and sales of stock by the ESOP
- S-Corporation tax opinions for use by the board and financing sources
- Re-leverage or second stage transaction structure, negotiation, and valuation
Annual Valuations and Related Services
- Annual valuations on behalf of the plan trustee as required by the Department of Labor
- Plan audit services
- Company sponsor financial statement audit services
- Tax compliance and ESOP accounting assistance
Sales of ESOP Companies
- Fairness opinions
- Merger and acquisition advisory
- Appraisals required for ESOP terminations
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