S Corporation ESOPs: Legal IssuesNCEO Webinar replays are the recorded version of our live Webinars, using PowerPoint presentations viewed online. To purchase a twelve-month subscription providing unlimited access to all recorded Webinars, including this one, follow this link. If you have a current subscription to the replays, log in here. (Replays are not available for individual purchase). Please contact Colleen Kearney at 510-208-1311 or firstname.lastname@example.org for additional information.
This replay was recorded on August 7, 2018.
About This MeetingS corporations are not taxed directly; rather, taxation is passed through to shareholders. However, to the extent an ESOP owns an S corporation, its share of corporate profits is not taxable for federal, and often state, income tax purposes. (The ESOP trust itself is the shareholder, not the employees in the plan.) Thus, an S corporation 100% owned by an ESOP pays no federal (and often no state) income tax. S corporation ESOPs do not have all the same benefits as C ESOPs; most notably, sellers to an S ESOP cannot defer capital gains taxes on the sale, and corporate ESOP contribution limits can be somewhat lower. There are also special rules to prevent S corporation ESOPs from being used primarily to benefit a small number of people. Nonetheless, S corporation ESOPs can be a tremendous competitive advantage and are expanding at a rapid rate.
This Webinar covers the legal issues you need to know about S corporation ESOPs.
Steven B. Greenapple