It’s possible with an Employee Stock Ownership Plan.
Whether you handle accounting for businesses or for estates, you’ve probably encountered a liquidity crossroads. A client wants to monetize their privately-held company, but they have capital gains and estate tax concerns, and they’re hesitant to give up autonomy. Strategic sales and private equity transactions rarely meet these needs.
An ESOP is an ERISA-authorized, defined contribution plan that invests in employer securities. A company’s stock is sold to an employee trust at a fair market valuation. The transaction is funded through commercial and/or seller financing and paid-off with pre-tax corporate cashflow. This frees business owners’ capital without sacrificing their legacy, creates a unique employee benefit, and carries a host of potential tax-related advantages.
Business owners who sell at least 30% of their company to an ESOP trust can defer or eliminate capital gains taxes on the sale proceeds by reinvesting in a qualified replacement property.
Companies can deduct the sale value to reduce taxable income, and income taxes can also be permanently eliminated when a company is 100% employee-owned.
Business owners can make gifts of retained interest to family and prepare for estate tax burdens at a time when a company’s value is depressed by leverage.
Leading accountants trust CSG Partners to analyze, structure, finance, and close complex ESOP transactions for their clients. Our focus on education, and our commitment to honoring advisor-client relationships, has led to hundreds of completed transactions and numerous industry awards.