There are multiple classes of stock that an ESOP can own. In our video, we discuss the different classes of stock.
Classes of Stock
The Internal Revenue Code defines employer securities for privately held companies as including common stock if the common stock has the highest combination dividends rights and voting rights of any class of common or preferred stock if the preferred stock is freely convertible into common. Some advisors use a common stock which they call super common even though that’s not defined in the Code section. They use either the convertible preferred stock or the super common stock for the purposes of allowing the corporation to pay a tax deductible dividend to finance an ESOP loan transaction.