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Home > Resources > ESOP > ESOP Succession Planning: Two Reasons It Might Be Right For You

ESOP Succession Planning: Two Reasons It Might Be Right For You

February 18, 2018 by Kevin Long

Colleagues having discussion at conference table

Broadly speaking, ESOP succession planning is a great option for companies looking to accomplish one of two goals — an owner exit strategy and employee benefits planning. And the great thing about an ESOP is that it can often accomplish both of those goals if it’s designed well. Here are some reasons companies choose ESOPs to create better futures for themselves.

ESOP Succession Planning

Sellers looking to either exit a business or gain liquidity have limited options. One option is a third-party sale to a strategic buyer or a private equity firm. Such buyers may not be available, and if they are, they may not present terms that fit what the sellers want for themselves or their company.

An ESOP allows sellers flexibility. They can smoothly transition out of the business and stay involved until they’re ready to step away. This allows for management continuity, but it also allows owners to maintain a stake if they so choose. This is especially helpful for a family business where there are no family members willing or able to take over the business.

ESOPs also offer considerable tax benefits to selling shareholders. We tailor the ESOP to maximize those tax benefits based on the owner’s goals and other factors.

Employee Benefits

ESOPs offer numerous employee benefits, including management continuity and preventing or forestalling a sale to outsiders. This effectively makes the company — and employees’ jobs — more secure than they might be under third-party ownership. The company is likely to be further strengthened by the demonstrated gains in productivity, growth and profitability seen in ESOP companies.

On a personal level, employees participating in an ESOP get a retirement benefit funded entirely with employer contributions. They can also receive dividends on stock, if available. ESOP participants are generally more dedicated and satisfied employees due to the direct link between the company’s success and their own.

Some Of The Reasons For Setting Up An ESOP

In this video, ESOP attorney Kevin Long explains why ESOPs appeal to so many business owners and their employees.

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Filed Under: ESOP Tagged With: Video

About Kevin Long

Kevin has personally worked on every one of our 400 ESOP cases. Designing new ESOPs or assuring sustainability for existing ESOPs, he guides companies to achieve goals with their benefit plans in a tax-advantaged manner while incentivizing their employees to greater productivity.
Learn More About Kevin

EDITOR’S NOTE: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government’s rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660.

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