Advantages of Employee Ownership

Invest in Your Employees
and Your Business with an ESOP

As of 2022, the National Center for Employee Ownership (NCEO) estimates roughly 6,500 ESOPs covering almost 14 million participants.

ESOPs offer substantial tax benefits to business owners and their companies. We take the following into account:

Ensure tax minimization strategies are explored and implemented promptly through regular meetings with your finance team
Consult with management throughout the year to ensure the proper treatment of transaction items, including the annual yearend financial and tax physical
Emphasize optimal tax minimization strategies for federal, state, and local taxes while meeting compliance obligations
Optimize future investments and exit strategies with a proper tax and business structure
Take into account a volatile tax landscape with long-term tax planning
Determine research and development credits, including Employee Retention Credits
Research cost-segregation tax benefits
Consider accelerated depreciation, including Section 179
Look at outside services or subcontractors, including worker classification
Identify potential tax implications of shareholder loans and IRS risks to ensure proper documentation.

Capital gain on the sale of shares of a C-Corporation to an ESOP may be deferred by the selling owner as long as, among other requirements, the ESOP owns 30% or more of the corporation’s shares after the transaction and the selling owner invests the sale proceeds in the qualified replacement property. »
The percentage of profits of an S-Corporation owned by an ESOP is not subject to federal (and possibly state) income tax because ESOPs are income tax exempt. »
Contributions by the company to the ESOP (including contributions used by the ESOP to pay principal and interest on a loan) are considered contributions to a tax-qualified employee benefit plan and are tax deductible within certain limits. »
Dividends paid on stock held by the ESOP are tax-deductible to a C-Corporation (but not an S-Corporation) if distributed to ESOP participants or are used to pay principal and interest on a loan.
There are estate and charitable gifting planning opportunities for the selling owner.
Employees receive tax-deferred retirement benefits, eligible for tax-free rollover upon distribution from the ESOP.