On average, ESOPs are wins for everyone—sellers, employees, and the company itself—but the average is pulled up by a handful of stellar ESOP companies.
To get the tax benefits employee stock ownership plans (ESOPs) provide, companies must abide by the rules designed to make sure taxpayers are getting their money's worth.
Business owners who want to generate liquidity for their ownership interests often look at selling to an employee stock ownership plan (ESOP) as the most attractive mechanism.
A commonly distressing experience for owners in a company with an employee stock ownership plan (ESOP) is that the price of the business as a whole is not the price the ESOP will actually pay.
Back in 1982, the National Center for Employee Ownership was in its second year. Our staff consisted of three people: Karen Young, myself, and an intern, Mike Yoffee. We thought it would be a good idea to have an employee ownership week.
The advantages of ESOPs are appealing, but it may not be feasible for every company. Selling to an existing ESOP company could make more sense for some businesses.
When most people think about employee ownership, they envision employees actually buying shares. That is not how an ESOP works. Instead, these plans are funded by the future tax-deductible profits the employees help earn after the plan is set up.
