In this episode of The Ripcord Moment with Joe Seetoo, Sheryl Bayani-Alzona is interviewed to offer her expertise on ESOPs. She navigates the nuances and complexities of ESOPs and discusses how business owners can evaluate an ESOP as an exit strategy before selling their business.
Evaluate ESOPs as an Exit Strategy
An ESOP is an employee stock ownership plan and the only retirement plan that is allowed to enter into a loan to purchase employer’s stock from selling shareholders. There are benefits of an ESOP to the selling shareholder including the ability to defer the payment of capital gains.
Sheryl also addresses common ESOP pitfalls that owners should be aware of, including the biggest one — whether they can afford it. Companies need cash flow to function and since an ESOP is funded by the company, it is important that the company’s cash flow is healthy. If you are considering an ESOP, we can help you through the suitability review process to ensure you understand if it is a good fit for your business.
