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Home > Resources > ESOP > What Is a Non-leveraged ESOP?

What Is a Non-leveraged ESOP?

May 3, 2024 by Employee Benefits Law Group

A non-leveraged ESOP does not involve borrowed funds to acquire the sponsoring employer’s stock. It is funded by contributions of cash or stock directly from the employer sponsor. Learn more in the video.

 

Non-leveraged ESOP

Non-leveraged ESOP simply refers to an ESOP that does not use debt or leverage or financing to buy stock. Sometimes a non-leveraged ESOP is referred to as a stock bonus plan. 

A company can contribute stock and take a deduction for the shares contributed or the company can contribute cash to the ESOP and the ESOP can use that cash to buy shares. Frequently companies will start with a non-leveraged ESOP to get the employee ownership culture and the percentage of the company owned by the ESOP started on a very gradual basis and then proceed to a leveraged ESOP for later transactions.

Updated May 3, 2024

Filed Under: ESOP

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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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