ACG Kentucky panel talks about benefits of ESOPs

Click here to read the original article at bizjournals.com For business owners who want to cash out but still oversee the direction of the company and take care of their workers, an employee stock ownership plan might be the best bet. That was the message from panelists Tuesday morning at the monthly meeting of ACG Kentucky, the local affiliate of the Association for Corporate Growth. Many entrepreneurs get caught up in the tax benefits of ESOPs, but sellers have to consider their goals, said Alan Taylor, a partner in Louisville accounting and consulting firm BKD LLP. “If you just want to cash out and go to the beach, there would be other transactions that would be better,” he said. ESOPs serve as retirement plans for employees. An ESOP, controlled by a trustee, buys all the shares of a company. Then, company profits are placed into accounts for employees, with payouts based on ... Read More..

Consider an ESOP as a Better Alternative When It Comes Time to Exit Your Business

(Why Selling Your Stock to an ESOP is Better than Selling to a Third Party) If you are the owner of a successful decorative plumbing or hardware business, sooner or later you will face the prospect of having to exit the business, either because you wish to retire or because you wish to cash in the value of what you have built up and pursue other interests. ... Read More..

The Origin and History of the ESOP and Its Future Role as a Business Succession Tool

The First ESOP (1956) San Francisco lawyer and economist Louis O. Kelso created the first employee stock ownership plan (ESOP) in 1956 as a way to transition ownership of Peninsula Newspapers, Inc. from its two founders (both then in their 80s) to their chosen successors, the managers and employees. Kelso had long believed that the company’s own employees should be the logical buyers and the ultimate owners; they were the ones who made the business successful in the first place, and the ones who knew the ins and outs of the business better than anyone else in the industry. The two founders had long wanted their employees to inherit ownership. They had promised that when the time came for them to retire, the employees would have the first right of refusal. They had seen too many of their competitors gobbled up by large newspaper chains, and they had seen the ... Read More..

A Modest Proposal for a New, New Deal

Capitalism collapsed in the fall of 2008. It’s collapse was also the direct result of a flaw in the system. Capitalism promised universal opportunity and a rising tide for everyone. To achieve this result, capitalism privatized and/or deregulated every possible industry. It glorified greed, extravagant executive compensation, and financial manipulation. Just as in the case of communism, it failed to place any real purchasing power into the hands of the workers. Over the past 20 years, the economic purchasing power of U.S. workers has decreased by an alarming percentage, despite the overall growth of the U.S. economy. U.S. capitalism delayed the day of reckoning by devising a host of innovative but lethal financial tools such as subprime mortages, negative amortization loans, and credit cards and automibile loans that were issued with no questions asked. Now that the bubble has burst, the Goverment’s only solution seems to be a massive “stimulus” ... Read More..

ESOPs and PHILANTHROPY: What Non-Profit and Tax-Exempt Organizations Should Know about ESOPs

Approximately 97 percent of our nation’s businesses are privately-held. In spite of this, charitable and tax-exempt organizations have not achieved particularly significant results in securing major gift income from owners of closely-held companies. The reasons for this apparent oversight may be understandable. Although small business owners may head enterprises worth substantial amounts of money, frequently, the bulk of their net worth can be tied up in the companies they own. Thus, even if owners of closely-held companies express an interest in philanthropy, the chances are their gifts might need to be funded with closely-held stock. It is this which poses two problems: Stock issued by privately-held companies can be very difficult to value. In addition, there is usually no ready market for privately-held securities. There is a related problem. In many instances the business owner may have held this stock for a prolonged period; and during that time, the stock ... Read More..

Why Giving To The Esop Foundation Is Now Critically Important

By John D. Menke Although the Employee Stock Ownership Plan (“ESOP”) concept continues to enjoy bipartisan support in Congress, this support is still not deep. Current support for the tax incentives that are essential to the adoption of new ESOPs comes from only a handful of key members of the House and the Senate.Meanwhile, during recent years many ESOP allies have retired or lost their seats. We now have fewer ESOP supporters than at any time during the last 20 years. This problem is compounded by the following unfortunate facts: First, most Congressional representatives rely heavily upon staff to advise them on proposed bills. These aides are recent university graduates with little or no knowledge of ESOPs; moreover, they tend to serve only a year or two before moving on to the private sector. Given their lack of knowledge of the benefits that ESOPs provide to American workers and business ... Read More..