EMPLOYEE STOCK OWNERSHIP PLAN
ESOP IMPLEMENTATION, VAUATIONS & FULL SERVICE ENGAGEMENT
Our staff of experienced ESOP (employee stock ownership plan) professionals and practitioners will take care of your plan every step of the way. From ESOP attorneys to ESOP trustees, to specialized business valuators, we have all the necessary man power to successfully design and implement your plan.
As you can see from below, we have established a streamline procedure to accelerate the ESOP distribution and completion of your plan. Trust us to do what’s best for your corporation and its employees. Read Articles about Ron Lint and ESOPs.
There’s no time like the present to get started on your ESOP!
The Ultimate Exit Strategy and Financial Tool
Employee Stock Ownership Plans (ESOPs) are a powerful tool in today’s world of corporate finance. Like any sophisticated financial tool, however, ESOPs must be planned and structured properly, which requires deep experience in designing, implementing and valuing ESOP companies.
ATICG is a leader in the design, implementation and valuation of ESOP, with over 15 years of direct practice experience, and the successful implementation of numerous plans. We are a member of the National ESOP Association, which serves the nation’s ESOP companies and professional advisors by offering high level educational material and symposiums, and by providing lobbying efforts in the U. S. Congress to insure passage of friendly legislation.
ESOPs can provide unparalleled financial benefits when applied properly to real-life needs and concerns within today’s corporate environment. Whether for reducing or eliminating taxes, growing through acquisitions, building capital, planning for management succession and ownership transfer, or for reducing the cost burden of employee benefit packages, ESOPs deserve careful consideration by companies as a tool for future success and staying power.
What is an ESOP?
An ESOP is a Qualified Plan under the Employees Retirement Income Security Act of 1974 (ERISA). See Sections 401(a), 4975(e) and 501(a) of the Internal Revenue Code of 1986, as amended, and Section 407(d)(6) of ERISA, 1974. What you can do with this powerful tool of personal and corporate finance is nothing short of amazing. The following will summarize the benefits of an ESOP, and if you have any questions, please feel free to contact our employee stock ownership plan professionals.
An ESOP is a defined contribution, tax-qualified plan that has two distinguishing features: (1) An ESOP is allowed to invest exclusively in the stock of its sponsoring company; and (2) an ESOP can borrow money. A sponsoring corporation can contribute cash or stock to an ESOP on a tax-deductible basis, increasing cash flow. Owners of privately held corporations can sell all or part of their stock to an ESOP for full Fair Market Value, often completely avoiding capital gains tax on the transaction.
Why Consider an ESOP? The Four Powerful Uses
Did you know that you can sell your company stock to an ESOP and pay absolutely NO TAX on the transaction? That’s right! An ESOP provides the only way under the U.S. Tax Code to sell highly appreciated company stock and totally avoid capital gains tax on the transaction. This is the ultimate exit strategy!!
Did you know that you can actually purchase capital goods with pre-tax dollars, if structured through an ESOP? Think of the competitive advantage?
Did you know that you can purchase another company with pre-tax dollars, if structured through an ESOP? That means you’ll be paying only 66-cent-dollars for the purchase of a company. Compare that to the normal after-tax cost of approximately $1.52!
Did you know that you can refinance existing debt through an ESOP and then fully tax-deduct the Principal and interest on the repayment of the debt? That’s right! Sound too good to be true? But it is true! That’s the power of an ESOP.
ESOP Benefits for the Shareholder
| • | Tax-deferred (deferred permanently, if structured properly) transaction on the sale of stock to an ESOP (for owners of ‘C’ Corporation) |
| • | Seller obtains top dollar, controlling interest value on the sale of stock to an ESOP |
| • | Shareholder can sell stock and remain in control |
| • | Seller obtains additional annual income due to investing pre-tax dollars |
| • | Seller diversifies investments (all of the eggs are no longer in the company basket) |
| • | Seller obtains liquidity and flexibility for estate planning |
| • | Seller has control over the sale of his/her stock and the orderly transfer of management responsibilities |
ESOP Benefits for the Corporation
Creation of a quasi-public market for corporate stock (go public internally).
| • | Corporation obtains 100% deductibility of PRINCIPAL and interest on an ESOP loan |
| • | Corporation can fully deduct DIVIDENDS paid to reduce ESOP debt |
| • | Corporation experiences increased cash flow due to the deductibility of principal on an ESOP loan |
| • | Collateral for an ESOP loan is created outside the corporation |
| • | Corporations engaging in ESOP transactions often obtain preferred terms on ESOP loans |
| • | Corporation can often experience increased cash flow due to the possible reduction in the seller’s corporation-provided compensation |
| • | Ability to attract and retain productive employees |
| • | Creates a take-over defense by means of a friendly voting block |
| • | Ability to give employees equity in the company with no payment on their part, on a tax-deductible basis |
| • | Corporation can refinance existing debt on a tax-deductible basis |
| • | Corporation can merge with or acquire another corporation using pre-tax dollars |
| • | Corporation can purchase capital goods using pre-tax dollars |
| • | In some circumstances, corporation can recover taxes paid in previous periods |
| • | Corporation can increase its net worth and appraised value by rolling over existing qualified plans into an ESOP |
ESOP Benefits for the Lender
| • | Enables lender to retain successful customer |
| • | Opens door for additional lending opportunities with successor management |
| • | Safe and well-collateralized loan |
| • | Increased profitability through closing fees and initial audit fee |
| • | Opens new market to lender. |
ESOP Benefits for the Employee
Employees have a ‘put option’ and a market for their company stock, giving them options and control which leads to increased morale and loyalty.
| • | Ownership of employer securities |
| • | No payment required from employees |
| • | ESOP loan is non-recourse to employee |
| • | Retirement plan that directly correlates with the performance of the employees |
| • | Put option required by law |
| • | No fear of job loss upon sale of company |
| • | Increased morale |
| • | Creation of a quasi-public market for Corporate stock- go public internally. Employees have a “put option” and a market for their Company stock. Increased morale. |
Newspaper Articles About ESOPs
If you would like a preliminary indication of the ability of your company to implement an ESOP, please download the Microsoft Excel based ESOP Pre-Qualification Questionnaire, fill it out and e-mail back to us at ron@aticolorado.com. We will attempt to answer your inquiry within 48 hours. There is no charge for this service. Or if you have any other questions, please use our contact form for ESOP questions.
ESOP Documents Download
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ESOP Engagement Master Checklist
This document is for the use of ATICG clients, law firms (working with the client) or CPA firms (working with the client).
Should you have an interest in this document, please click here to contact us. - Guidelines for Implementing an ESOP Committee in a Corporate Environment
This document is for the use of ATICG clients, law firms (working with the client) or CPA firms (working with the client).
Should you have an interest in this document, please click here to contact us. - ESOP Implementation Schedule – Critical Path
This document is for the use of ATICG clients, law firms (working with the client) or CPA firms (working with the client).
Should you have an interest in this document, please click here to contact us. - Repurchase Liability Study Questionnaire & Document
- 16 Steps to a Successful ESOP
- The Truth About ESOP Professional Fees
- Data Request for Loan Applications
- Did You Know? Agents (request required) · Clients · CPAs & Attorneys
Agents
This document is for the use of ATICG clients, law firms (working with the client) or CPA firms (working with the client).
Should you have an interest in this document, please click here to contact us.
