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Employee Stock Ownership Plans Services
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Is an ESOP for me?
About
Services
Employee Stock Ownership Plans Services
Succession Strategies
Valuations
Featured Clients
Contact Us
News & Updates
Is an ESOP for me?
Commercial Contractor
Background
Commercial plumbing and mechanical contractor for large medical centers, tech facilities, manufacturing plants, and professional sports stadiums
C Corporation with approximately 750 union and non-union employees
3 shareholders, several family members involved in the business
Company value $110,000,000
Goal
Tax-free liquidity event for owners
Exit strategy within 5 years
Employee retention & motivation
Method of rewarding non-union employees
Corporate tax deduction
Solution
Establish an ESOP, excluding union employees
All shareholders will sell 100% of their stock to the ESOP
In exchange for selling their stock sellers will receive cash and notes
Shareholders elect IRC 1042 to avoid/defer capital gains tax on stock sale
Following year of stock sale Company will elect S Corp status
Company will borrow $30,000,00 in senior debt
Benefit to Client
Owners received $30,000,000 cash at closing
Sellers carried the balance with 15 year notes (life of loan interest approx. $43,000,000)
Shareholders received warrants to divide between seller note holders
At the end of the seller note period the projected value of warrants is estimated to be $54,000,000
Sellers avoid over $40,000,000 in capital gains tax
As a 100% S Corp ESOP, 100% of future profit will not be taxed from that point forward
Over the next 15 years the corporate tax savings are estimated to be over $164,000,000
LOOKING TO ESTABLISH YOUR ESOP?
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