Socialism and communism developed as a reaction to the concentration of ownership and the abusive labor practices that developed in the early stages of capitalism. However, after nearly a century of conflict between these two competing economic systems, a century that witnessed two world wars and a protracted cold war, we have seen in the…
By John D. Menke, Esq. Now that the dust has settled following the passage last December of the Tax Cuts and Jobs Act of 2017 (“TCJA”), it is clear that the new tax act confers substantial tax benefits on businesses and their owners and also makes ESOPs even more attractive, both for existing ESOP companies…
By John D. Menke, Esq. A & E firms, like other service businesses, face two challenges to business succession. First, how will the firm finance the buyout of the founders when they are ready to exit the business? Second, how will the firm best be able to provide equity incentives to attract and retain key…
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.…
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…
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…
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…
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.
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…
By: John D. Menke There are good reasons to consider selling your firm to your own employees through an Employee Stock Ownership Plan (ESOP). No other alternative combines maximum financial advantage with the flexibility that enables you to customize the sale to fit your own particular circumstances. An ESOP enables you to sell your business…
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 its employees under the provisions of an Employee Stock Ownership Plan (“ESOP”).
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…
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,…
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…
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,…
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…
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…
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,…
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…