Employee stock ownership plans enable private companies to sell equity to an employee trust. Here's how a leveraged ESOP plan works:
An ESOP trust, representing at least 10 employees, buys company stock.
The price is negotiated with an institutional trustee, based on an independent valuation.
Commercial and/or seller financing, paid-off with pre-tax corporate cashflow.
Full-time employees are allocated shares proportional to their annual compensation.
A portion of all shares is allocated annually; the shares vest within 3-6 years.
Vested stock is sold back to the company, at a current valuation, when employees depart.
An employee stock ownership plan can create liquidity and diversification opportunities for selling shareholders, tax benefits for sellers and their companies, and a meaningful employee incentives.
Paid fair market value for stock
Can maintain role & upside in company
May defer capital gains taxes on proceeds
Enhance cash flow with tax deductions
Can become income tax-free entities
Gain talent attraction & retention tool
Secure unique retirement benefit (stock)
Earn real stake in their company
Gain workplace stability & peace of mind
When Larry Kaplan founded CSG Partners in 2000, he made education a priority. That remains central to everything we do. So, if you have questions about employee ownership, selling to an employee stock ownership plan, or how to prepare for a transaction, you've come to the right place. You'll find answers below and more on our ESOP Resources page.
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