ESOP Fable #5: Only Higher-Paid Employees Benefit in an ESOPLearn more January 10, 2013 Timothy L. Stewart esop compensation esop allocations for employees Some employers have attempted to establish ESOPs solely for the benefit of management employees. There was even one case where a business owner tried to establish one where he was the only participant. This has given some people the impression that an ESOP is a tool to put more compensation in the hands of the employer’s management and key employees. However, the reality is that the Internal Revenue Code mandates that, with a few exceptions, all employees who work at least 1,000 hours per year for the employer must be allowed to participate in the ESOP. Such employees share in employer stock allocations in the same proportion as each employee’s total annual compensation compares to the entire pool of compensation for the employee group. Continue reading
ESOPs as Estate Planning ToolsLearn more January 04, 2013 Timothy L. Stewart ESOP estate planning Many business owners fail to plan properly for disposition of their assets upon death (i.e., the essence of estate planning). This is often the case even with respect to the business owner’s largest asset: his/her business. We have written about the numerous tax, productivity and societal advantages of using ESOPs in succession planning, but there are some very obvious estate planning advantages as well, some of which are explored in this article from the University of Massachusetts-Amherst Family Business Center. Continue reading
ESOP Fable #4: ESOPs are Only for Very Large CompaniesLearn more December 27, 2012 Timothy L. Stewart closely held ESOP ESOPs for small business Some people believe that ESOPs are only used by very large companies; this notion is false. Although some very large employers do maintain ESOPs, they are also very common in the smaller, closely-held market. In fact, we normally tell business owners that even companies with as few as 20 employees can take advantage of ESOPs as a succession planning strategy. Continue reading
Another Great ESOP Story: Minnesota Grocery Store Chain Owner Sells to his EmployeesLearn more December 03, 2012 Timothy L. Stewart minnesota grocery store ESOP We noticed a recent online story regarding a Minnesota grocery store chain owner who bypassed purchase offers from much larger chains in favor of establishing an Employee Stock Ownership Plan and allowing his company to maintain its legacy through an ESOP. Continue reading
ESOP Fable #3: You Need a Bank Loan to Sell to an ESOPLearn more November 28, 2012 Timothy L. Stewart esop lending financing ESOP transactions Many business owners believe that, in order to finance the sale of a business to an ESOP, a bank must be available to finance the transaction. In fact, since the lending restrictions tightened in late 2008, fewer and fewer ESOP transactions have been financed by banks; yet, the ESOP transactions have continued to occur. How has this happened? Continue reading