» Menke ESOP Blog
January 9th, 2012
An increasing number of companies are turning to Employee Stock Ownership Trust financing as a means to simultaneously raise low cost capital and provide increased employee incentives and retirement benefits while reducing the cost of qualified plan benefits. The Employee Stock Ownership Plan is a qualified plan under Section 401(a) of the Internal Revenue Code. As such it is in the same family as pension plans, profit sharing plans and stock bonus plans. Nevertheless, The Employee Stock Ownership Plan (which …Read More..
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January 3rd, 2012
Advantages to C Corporations
Many companies that have ESOPs fail to realize that their ESOP can be used to the finance acquisitions with pre-tax dollars. Normally, when debt is incurred to finance an acquisition, only the interest payments are deductible. Principal payments are not deductible. However, if the acquisition is financed through an ESOP, both the interest and the principal payments will be fully deductible, and this will be true whether the plan sponsor is structured as a regular C …Read More..
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December 20th, 2011
Click here to begin the presentation
To download a pdf of the presentation slides, click here
This is a one-and-a-half hour live Audio/Web Seminar that covers the basics of ESOPs from A to Z.
This Audio/Web Seminar is designed for company owners and financial officers who want to determine whether …Read More..
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November 14th, 2011
The Los Angeles Times featured an article about Howard’s Appliance & Flat Screen Superstores, which has been 100% employee-owned since 2000.
The company, which started as a radio repair shop in San Gabriel, sold nearly half of the company over to the employees when the government approved employee stock ownership plans in 1976. Employees acquired 100% of the company in 2000. Howard Roach still retains his place as chairman of the board. …Read More..
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November 10th, 2011
Mills James, a comprehensive creative media production company based out of Columbus, Ohio has made an animated film explaining how their Employee Stock Ownership Plan (and how ESOPs in general) work. Mills James employs about 150 employees and specializes in the following areas: Teleproduction, Broadcast Production, Business Video, Meetings & Events, Web Interactive and Original TV Productions.
To read more about Mills James and their ESOP, you can visit their website here.
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October 31st, 2011
H.R. 1244, the “Promotion and Expansion of Private Employee Ownership Act of 2011,” was introduced March 29, 2011by a bi-partisan group of key members of the House Ways and Means Committee: Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Charles W. Boustany, Jr. (R-LA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN), and Bill Pascrell (D-NJ).
“This bi-partisan declaration of support for employee ownership through the ESOP (employee stock ownership plan) model among privately …Read More..
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October 28th, 2011
Local business owners say they’re spreading the wealth in Great Falls by offering long term employees stock ownership plans or ESOP’s.
It’s a structure that is set up and its federally recognized, so the employees are then part of a trust that then owns either a 100% of the company or some portion of the company,” said Sletten President Erik Sletten.
Today at Sletten Construction company, ESOP’s were the main topic of …Read More..
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October 19th, 2011
Click here to begin the presentation
To download a pdf of the presentation slides, click here
Program Agenda
- Valuation Considerations
- Sell Now Or Sell Later?
- Tax Considerations
- Pay Uncle Sam Now Or Pay Uncle Sam Later?
- To Participate In Esop Or Not To Participate?
- Financing Considerations
- To …Read More..
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October 12th, 2011
Read the original posting at the Cal-Tex Website
Cal-Tex is 97% employee-owned through an Employee Stock Ownership Plan (ESOP).As the 2011 Grand Prize Winner of theNational Center for Employee Ownership’s Innovations in Ownership Award and the 2011 ESOP Association’s Best Communications Award (Small Company), Cal-Tex is committed to providing a company structure that will benefit the employee and the customer. If you are considering becoming a Cal-Tex employee or customer, …Read More..
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October 12th, 2011
Topics Covered:
Loren Rodgers
October 3, 2011
- Two M&A Transactions at MYI in One Week
- Documentary in Progress
- Department of Labor to Re-Propose Fiduciary Regulation
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October 11th, 2011
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 …Read More..
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October 10th, 2011
(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 …Read More..
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October 5th, 2011
National Van Lines Inc. said it has changed the company’s structure, selling itself to an employee stock ownership plan entity.
The third-generation, family-run business said it has been working on transitioning to an ESOP-owned S Corp. structure since July 2010 effort to “find an ownership and liquidity succession plan that did not disrupt the culture or the people.”
The ESOP structure gives National Van Lines with tax savings, improved employee benefits and financial flexibility, the Broadview-based company said in a …Read More..
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October 5th, 2011
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 …Read More..
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October 4th, 2011
WASHINGTON, Sept. 14, 2011 /PRNewswire-USNewswire/ — Results from the Employee Ownership Foundation’s 20th Annual Economic Performance Survey of ESOP (employee stock ownership plan) companies that are members of The ESOP Association show that ESOPs, while not immune to economic developments beyond their control, have seen an upturn over the past year. The survey shows ESOP companies, by significant percentages, continue to have increased share value, better productivity, and overwhelming support among leaders of the companies.
Since the survey’s beginnings 20 …Read More..
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September 28th, 2011
Distributions from an ESOP in the form of shares of company stock have many advantages. One of the compelling reasons for making distribution in the form of company stock, for example, is that distributions in the form of company stock enable participants to have a portion of their distribution taxed at long term capital gains tax rates rather than having the entire distribution taxed at ordinary income tax rates.
This tax benefit derives from IRC Section 402(e)(4)(B), which provides that …Read More..
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September 26th, 2011
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 …Read More..
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September 26th, 2011
For additional information, contact: Angie Lamielle, Senior Marketing Associate 330-684-4002 alamielle@willburt.com
For Immediate Release: Monday, June 06, 2011
The Will-Burt Company is celebrating its 25th year as an Employee Owned Company. Will-Burt employees have been participating in the Employee Stock Ownership Program (ESOP) since its inception on December 31, 1985. Will-Burt will be holding a celebration for its employees and retirees on June 16, 2011 with a special recognition for over 60 employees who have participated in the ESOP …Read More..
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September 26th, 2011
A “perfect storm” has hit the U.S. economy and its privately-held businesses. Consumer purchasing power has dried up, resulting in reduced revenues for almost all privately-held businesses. At the same time most banks have stopped or curtailed lending, and bank credit is no longer available to many businesses.
During the past two quarters many businesses have downsized their operations and have implemented reductions-in-force, yet they are still faced with negative cash flows.
Fortunately, there is a perfect solution to the …Read More..
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September 24th, 2011
Background
One of the concerns that arises in the case of a company that is 100% owned by its ESOP (or where an ESOP owns less than 100% of the outstanding stock, all of the stock held by the ESOP is allocated, and the ESOP will not be acquiring any additional stock) is that once all of the outstanding shares have been allocated to the participants, there will be no stock left to allocate to new participants, except for (a) …Read More..
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September 23rd, 2011
A “perfect storm” has hit the U. S. economy and its privately-held businesses. Consumer purchasing power has dried up, resulting in reduced revenues for almost all privately-held businesses. At the same time most banks have stopped or curtailed lending, and bank credit is no longer available to many businesses.
During the past two quarters many businesses have downsized their operations and have implemented reductions-in-force, yet they are still faced with negative cash flows.
Fortunately, there is a ready solution to …Read More..
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September 22nd, 2011
Virtually every ESOP appraisal that has been written in the past 10 years has concluded that, both in the case of purchases of company stock by an ESOP from direct shareholders and in the case of subsequent distributions and repurchases of company stock to and from plan participants, the discount for lack of marketability is greatly diminished by virtue of the ESOP “put option.” This article reviews the origin and development of the put option argument in the appraisal literature …Read More..
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May 25th, 2011
Here is a video posted by one of The Menke Group’s Clients:
WinSystems, an embedded PC designer and manufacturer, provides a high level of quality and customer service through an Employee Stock Ownership Plan (ESOP). This leads to employees holding a direct stake in maintaining a high level of customer service.
Here is the full press-release:
WinSystems Adopts Employee Stock Ownership Plan September 19, 2007, Embedded Systems …Read More..
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May 13th, 2011
The following is a list of affected sections of the Code and the 2010 limitations of interest to the ESOP community
Code Section Description 2010 Limitations 2011 Limitations 401(a)(17) Limit on the amount of annual compensation taken into account $245,000 $245,000 402(g)(1) Limitation on the exclusion for elective deferrals described in Section 402(g)(3) of the Code $16,500 $16,500 404(l) Limitation on the amount of annual compensation taken into account $245,000 $245,000 409(o)(1)(C)(ii) Dollar amount for determining the maximum account balance …Read More..
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May 13th, 2011
An Employee Stock Ownership Plan (“ESOP”) may be the solution to your succession-planning dilemma
by John D. Menke
President, Chief Executive Officer
as published in the January, 2006 issue of
Electrical Wholesaling – the Independent Voice of Electrical Distribution
The exit strategies available to owners of electrical wholesaling firms are somewhat limited. The available strategies include selling the business to a competitor, selling the business to the management employees, or selling the business to all of …Read More..
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May 13th, 2011
Click here to download the full article in pdf format
ESOPs were first authorized by federal legislation in 1974. Since that date, there have been more than 25 separate pieces of legislation that have further defined what an ESOP is and what an ESOP is permitted to do. Despite this fact, there are more misconceptions about ESOPs than about any of the other similar financial tools that exist in the marketplace.
The following describes …Read More..
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May 13th, 2011
USES OF AN ESOP
A Readily Available Market for Controlling Shareholders
Frequently, controlling shareholders desire to sell a part of their shares in order to diversity their holdings, or to provide liquidity for investment or estate planning purposes. Usually, however, there is no market for the sale of a minority interest in a closely-held company.
The adoption of an ESOP solves this problem by providing a readily available market for the purchase of shares from controlling shareholders. Moreover, the …Read More..
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May 13th, 2011
WHAT IS AN ESOP?
The best way to explain an ESOP is to compare it to a profit sharing plan. ESOPs can do all the things a profit sharing plan can do. However, ESOPs can do a great many things that profit sharing plans cannot do. Profit sharing plans are regarded primarily as employee benefit plans. The ESOP is primarily regarded as a “tool of corporate finance,” according to IRS rulings and regulations.
Accordingly, ESOPs are permitted under profit sharing …Read More..
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May 13th, 2011
USING ESOPS TO IMPROVE EMPLOYEE PRODUCTIVITY
You’ve read about them—companies that seem to have found the key to success in an unstable
business environment:
- “Sales Jump 312% as Employees Learn Rules of the Game” at Springfield Remanufacturing Corporation in Missouri. Management Accounting.
- Inc. magazine awards its Entrepreneur of the Year award to all 240 owner-employees of the Connecticut firm Reflexite, Inc. Out of 2,700 private companies evaluated, 4 of the 5 finalists had …Read More..
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May 13th, 2011
S. 1612 – The ESOP Promotion and Improvement Act of 2009:
On August 6, 2009, Senator Blanche L. Lincoln (D-AR) introduced S. 1612, the ESOP Promotion and Improvement Act of 2009. The legislation has four sections, including an entirely new proposal to remove a 35 year bias against ESOP companies by the Small Business Administration.
One, S. 1612 would repeal the punitive 10% penalty tax on S corporations distributions from current earnings, also referred to as dividends, placed on the …Read More..
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May 13th, 2011
Fall 2010
Written by Loren Rogers
In a project funded by the Employee Ownership Foundation, the NCEO did an extensive analysis of ESOP companies using data from the US Department of Labor. Unlike prior research, the study carefully compiled data from multiple plans within a single company and used multiple years of data for each plan. It concluded that ESOP companies are more likely to offer a second defined contribution (DC) plan than non-ESOP companies are to offer any DC …Read More..
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May 13th, 2011
August 11, 2010
The ESOP Association and the Employee Ownership Foundation released today the results of a survey conducted among the Association’s 1,400 corporate members in the first quarter of 2010 which confirms positive benchmarks for ESOP (employee stock ownership plan) companies. The company survey is conducted every five years and was last completed in 2005. Prior to 2005, the survey was completed in 2000. The eye-opening statistics of the 2010 survey are the increase in age of the ESOP …Read More..
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May 13th, 2011
Ross Group Inc of Dayton, Ohio announced that the company has formed an Employee Stock Ownership Plan (ESOP) and has joined the growing list of companies whose employees are stockholders. “When the transaction is completed,” said Mr. Mark Ross, President and CEO, “the employees of Ross Group Inc will own just under 25 percent of the Company.”
Mr. Ross said, “We had an immediate need for one of our shareholders to exit, but beyond that, the ownership team wanted to …Read More..
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May 13th, 2011
Wednesday, June 30, 2010
Clif Bar & Company announced the selling of family owned common stock to its employees through an employee stock ownership plan (ESOP). Employees through the ESOP own 20% of the company, while husband and wife owners Gary Erickson and Kit Crawford retain the remaining 80%.
No change in management structure will take place, with Erickson and Crawford remaining majority owners and co-CEOs of the company.
“All along we wanted to create a company where we would …Read More..
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May 13th, 2011
FOR IMMEDIATE RELEASE
Technomics, Inc. Benefits Employees with Stock Ownership Plan
Arlington, VA – January 26, 2010 Rick Collins, President and CEO of Technomics, proudly informed employees on January 26, 2010 that the Company formed an Employee Stock Ownership Plan (ESOP) and, in doing so, has joined the growing list of companies whose employees are stakeholders. “The Plan has several objectives,” Mr. Collins indicated. “First, to provide ownership of the company to those that build the company; second, to provide …Read More..
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May 13th, 2011
Written by Phillip Swagel and Robert Carroll
Executive Summary
A study of a cross-section of Subchapter S firms with an Employee Stock Ownership Plan shows that S-ESOP companies performed better in 2008 compared to non-S-ESOP firms along a number of dimensions, including job creation, revenue growth, and providing for workers’ retirement security. The S-ESOPs paid their workers higher wages on average than other firms in the same industries, contributed more to their workers’ retirement security, and—crucially in a year of recession—hired workers when …Read More..
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May 13th, 2011
The ESOP – Employee Stock Ownership Plan – is, slowly, on the rise. These worker-owned businesses are more productive and could benefit the American economy.
Shoppers eye goods at the bakery of King Arthur Flour Co. in Norwich, Vt. The employee-owned firm was able to expand from its niche to deliver a broad product line.
Norwich, Vt.
A decade ago, John Schock of Pasadena, Md., reached his mid-50s and a crossroads. He could …Read More..
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May 13th, 2011
Small companies are rushing to reward workers with employee stock ownership plans as low valuations make awarding shares more attractive
Bob Moore gathered three employee shifts together last month for pizza parties to celebrate his 81st birthday. But Moore, the founder and president of Bob’s Red Mill Natural Foods in Portland, Ore., also had a surprise announcement: He was giving his 200 employees the company he founded in 1978.
“I thought some of them were going …Read More..
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May 13th, 2011
The NCEO has just completed an analysis of Form 5500 retirement plan filings filed by ESOP companies. The Form 5500 data are prone to considerable reporting and transcription error and should be used with caution, but many of the results described below are in accord with prior research, with our experience, and with best estimates from practitioners in the field. Among the companies studied, the average value of plan assets per participant is approximately $46,000. This compares to the average …Read More..
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May 12th, 2011
Dear Business Owner,
Would you be interested in selling part or all of your stock in your company if you could sell it for more than twice what it is currently worth?
Case Study I: The Benefits of a Gradual Sale to an ESOP
We recently helped one of our clients do just that. Company X is a successful home health care company whose sales and profits have been growing at 15% per annum. The owner recently turned down an offer …Read More..
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May 12th, 2011
Dear Reader:
As president of Menke & Associates, Inc., I believe there is significant untapped growth potential in most privately held companies.
Whether you want to sell some or all of your stock in the company in the next five years or whether you plan to remain active for the long term, Menke & Associates, Inc. proposes to work with you to develop a program which should help you achieve your growth …Read More..
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May 12th, 2011
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, …Read More..
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May 12th, 2011
Dear Business Owner,
This may be the opportune time to take action to avoid the increase in capital gains tax rates that will take effect after 2010.
As you may know, the Bush tax rate cuts, including the current 15% capital gains tax rate, are slated to expire at the end of 2010.
In addition, if the U.S. economy starts to turn around in the third or fourth quarter of this year, we believe there is a strong possibility that …Read More..
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May 11th, 2011
I. INCREASES IN CONTRIBUTION, DEDUCTION AND BENEFIT LIMITS
- Contribution Deduction Limits. The limit on an employer’s deduction for contributions to a non-leveraged ESOP or a profit sharing plan is increased from 15% to 25% of participants’ aggregate compensation. 401(k) deferrals are not counted for purposes of the deduction limits. However, 401(k) deferrals will be included for purposes of calculating the compensation on which this limit is based. The deduction limit for money purchase pension plans remains at 25%. Effective: …Read More..
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May 11th, 2011
Comparison of Old and New Provisions
Current Law New Law (EGTRRA) I. Increases in Contribution, Deduction and Benefit Limits Contribution Deduction Limits: An employer’s deduction for contributions (including 401(k) deferral contributions) to a profit sharing or stock bonus plan is limited to 15% of participants’ taxable compensation. The money purchase plan limit is 25%.
- The 15% deduction limit is increased to 25%.
- 401(k) deferrals do not count against the limit.
- Compensation used to determine deductions includes deferrals.
- Money purchase plan …Read More..
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May 11th, 2011
MEMORANDUM TO: ALL CLIENTS FROM: MENKE & ASSOCIATES, INC. LEGAL DEPARTMENT DATE: JULY 18, 2001
SUBJECT: NEW “REQUIRED MINIMUM DISTRIBUTION” RULES
Depending on the terms of your Plan, participants who are age 70½ or older, are generally required to receive a distribution from the Plan every year. We will refer to this type of a distribution as a “Required Minimum Distribution” or “RMD”. Under the old rules, the annual amount of the RMD was calculated using life expectancy tables, but only …Read More..
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May 11th, 2011
MEMORANDUM TO: ALL CLIENTS FROM: LEGAL DEPARTMENT DATE: JULY 18, 2001
RE: NEW REQUIREMENTS ON FIDELITY BONDING FOR QUALIFIED EMPLOYEE BENEFIT PLANS
I. BACKGROUND
Current regulations under ERISA require generally that all Employee Benefit Plans engage an Independent Qualified Public Accountant ( IQPA) to perform an annual audit of the Plan, and to include that accountant’s report as part of the Plan’s annual report. An exemption to this requirement has been given to small pension plans with less than 100 …Read More..
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May 11th, 2011
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 …Read More..
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April 13th, 2011
Information in this booklet has been developed for those owners of privately-held businesses who are interested in liquefying some portion of the equity which has accumulated in their companies. We have assumed that many of our readers may be interested in accomplishing this objective without sacrificing the identity of their companies, jeopardizing the jobs of valued employees or relinquishing control of the companies they own. An ESOP installation may provide the optimal solution for business owners hoping to achieve all of …Read More..
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January 11th, 2010
CONTRIBUTION AND ALLOCATION LIMITATIONS FOR PLAN YEARS ENDING IN 2009
Date: January 2010
C CORPORATION CONTRIBUTION LIMITATIONS (Sec. 404 of the Code):
Example: (The Sec. 404 limit is calculated for all employer plans in the aggregate.)
Sec. 404 Gross Compensation 1 $245,000.00 Less Sec. 401(k) Salary Reduction 0.00 Less Sec. 125 Salary Reduction 0.00 Net Compensation $245,000.00 x 25% (or 50% if the ESOP is leveraged)2 x 25% Maximum Total Contribution to All Plans 3 $61,250.00 Less Sec. 401(k) Salary …Read More..
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May 26th, 2009
Economic Stimulation and Solutions for Creating New American Jobs and for Protecting Existing American Jobs
By John D. Menke, Esq.
Historical Background of the American Dream
Since the very founding of the original thirteen colonies, America has always been known as the land of economic opportunity and as the most capitalistic country on the face of the earth. During the 1700s and the 1800s, immigrants by the millions came to our shores in search of the …Read More..
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October 20th, 2000
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 …Read More..
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October 19th, 2000
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 …Read More..
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