An Eligible Individual Account Plan (EIAP) may be a good option for a company that decides not to use an ESOP. We discuss this strategy in our video.
If a company determines that an ESOP is not appropriate, the other principal method of buying or selling stock on a tax-deductible basis is to use a form of a profit-sharing plan called an Eligible Individual Account Plan or EIAP. This plan actually affords a lot of flexibility for corporations to arrange what essentially can become a pre-tax buy-sell agreement transacting stock between the company and the shareholders. However, it does have the elimination that it doesn’t allow you to use financing to buy stock, but overall it’s a worthy alternative. Companies looking at ESOPs really should consider the EIAP versus the ESOP and decide what’s right for the company.