Ten Steps to a Successful ESOP

Employee Stock Ownership Plans (“ESOPs”) are federally qualified employee benefit programs governed by U.S. law. Since our president and founder, John Menke, wrote some of the original ESOP legislation in 1974, more than 25 additional laws have been passed to promote and broaden the benefits of ESOPs. In general, ESOPs offer owners of companies tax efficient means to sell all or part of their shares to their employees, on a timeline of their choosing. ESOPs have the added benefit of energizing employees to increase sales and profits as these employees become “owners.” Shares sold to an ESOP are held in a trust: the employees receive beneficial ownership, while and in most instances the selling shareholder retains control. The formation of an ESOP does not preclude the company from going public or being sold at a later date. Below are ten steps to understanding, designing and implementing an ESOP that is ... Read More..

The Joys Of An ESOP

NOVEMBER 1, 2004 The following article was originally published in Bloomberg Businessweek and written by Amey Stone Employee ownership can be a powerful tool Last November the 100 employees of Superior Plumbing & Heating, a mechanical contractor in Anchorage, Alaska, gathered on the snow-covered ground to celebrate their new status as full owners of the $20 million company. Cutting the ribbon and symbolically reopening the company was Jan Van Den Top, the 60-year-old president, who had sold his shares to the company’s employee stock ownership plan (ESOP). Van Den Top started the ESOP in 1995, contributing 42% of his shares as retirement perks for employees. In 2003 he learned of changes in the tax code that give generous breaks to S corporations that are fully employee-owned. He sold the rest of his shares to the ESOP, then switched Superior from a C corp to an S corp. The tax advantages ... 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..