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Sell all or a portion of your company

to a ready & willing buyer at full Fair Market Value while retaining control, salary & benefits plus indefinitely defer all capital gains taxes while leaving behind a completely income tax-exempt entity.
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EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

A qualified, defined contribution employee retirement plan designed to invest primarily in employer stock of a sponsoring company. ESOPs provide an opportunity for business owners or shareholders to successfully plan an immediate or gradual tax advantaged exit strategy, while also engineering the continued success of the business.

ESOP SERVICES:

  • Complete & Integrated ESOP Implementation
  • Preliminary Analysis & Feasibility Studies
  • Valuation Consulting
  • Plan & Transaction Design
  • Corporate Structure Evaluation & Modeling
  • Transaction Negotiation & Execution
  • Financing
  • Repurchase Liability Studies
  • Employee Rollout, Education, & Communication
  • Post Transactional Services
BTA-ESOPClientBrochure-Oct

EMPLOYEE STOCK OWNERSHIP PLAN

  • Owner retirement, investment divestiture, or immediate cash
  • Buy-out of active or inactive partners or investors
  • Divorces or Estate Sales
  • Management buy outs or takeovers
  • Owner diversification of stock concentration
  • Refinance of existing debt to allow for the deduction of both principal and interest costs
  • Reduce company debt load and increase corporate cash flow
  • Owners desiring to keep company locally intact with existing employees

GENERAL ESOP CANDIDATE PROFILE

  • ESOPs are very flexible which makes it difficult to provide strict guidelines; however, the following criteria has proven to be effective:
  • Business owner who desires partial or full liquidity
  • 20 or more full time permanent employees
  • Business value of $5,000,000 or more, or net income of approximately $1,000,000 or more
  • 5 year history of profitable operations
  • Strong second line management a plus

64% noted an increase in profitability.

Employee Ownership Foundation 23rd Annual Economic Performance Survey

OUR EXPERIENCE YOUR SUCCESS

YEARS OF COMBINED TEAM EXPERIENCE
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PROVIDING SERVICE IN ALL

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EXPERIENCE WORKING WITH

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STOCKHOLDERS
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MARKET VALUES OVER
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Advantages of an ESOP

For the seller...

  • The selling shareholder may indefinitely defer/eliminate all capital gains on the sale proceeds
  • The seller enjoys an immediate buyer of some or all of the seller’s stock at fair market value
  • The seller can retain personal salary, perks, benefits and control without interference of outside interest until ready to hand over the reigns
  • The seller retains personal and corporate legacy in the town in which he cares about and contributed to

For the corporation...

  • The company receives a dollar for dollar income tax deduction on the entire stock sale price
  • An ESOP company can be 100% federal and state income tax exempt
  • ESOP companies outperform their peers with increased productivity and higher return on investment

For the employees...

  • The employees enjoy enhanced retirement benefits of company stock with no out of pocket costs
  • An ESOPs orderly internal transfer of the company creates a more stable and reliable community employer than the intentions of an outside buyer
  • The company remains an important contributor to the community’s social and economic fabric

Frequently Asked Questions

An ESOP is a qualified, defined contribution employee retirement plan that can be used to purchase the stock of the sponsoring company. This allows company owners who have private, closely held company stock, to sell his/her stock to an ESOP in exchange for cash or notes to gain liquidity and create a market for the stock.

There are many reasons for owners to sell their stock to an ESOP, including some of the following:

  • The owner is able to sell the company at fair market value (FMV), with no negotiated discounts.
  • The ESOP is a ready-made market for the company stock.
  • No third party buyer needs to be located or involved.
  • Sellers can receive cash up front and retain control until completely “cashed out”.
  • Sellers can “defer” Capital Gains tax at the time of sale, or avoid them completely.
  • Substantial tax advantages are available. The company receives a dollar for dollar deduction of the value of the stock purchased from the selling owner, which may provide additional cash flow through tax savings.
  • Financing ESOPs can be easier and more efficient for businesses than conventional financing.
  • Sellers can sell all of their stock now, or portions over time allowing owners to receive cash now to diversify and ease out of the business over time.
  • Owner retirement or divestiture
  • Buy-out of active or inactive partners or investors
  • Divorces or Estate sales
  • Management led buy outs, takeovers, or divestitures
  • Owner diversification of stock concentration
  • Refinance of existing debt to allow for the deduction of both principal and interest costs
  • Reduce company debt load and increase corporate cash flow
  • Owners desiring to keep company locally intact with existing employees
  • Owner wishes to diversify for immediate cash, but retain some stock for future upside benefits
Business owner who needs liquidity At least 20 full time, permanent employees Business value of $5,000,000 or more, or net income of approximately $1,000,000 or more 5-year history of profitable operations “C” or “S” Corporation, or the ability to convert Strong second-line management
No. Control of the company does not have to change regardless of the percentage sold to the ESOP.
ESOPs have many moving parts and are complex requiring specialized knowledge, skill and expertise. Fortunately, BTA is a specialized ESOP consulting firm that works along side of a company’s owners and current advisors to efficiently navigate the installation process.
ESOP installation requires professional advisors who generally are not inexpensive. Ongoing costs include annual valuation and administration. Expenses must be compared to the significant economic and personal benefits of an ESOP as well as the fees associated with an outright sale.
An ESOP company must do annual corporate compliance which is already required. It is also a good idea to hold regular employee meetings to promote the ESOP and provide basic corporate status updates. Additionally, the company must be run for the benefit of all shareholders including the ESOP. However, the seller and family may retain control, continue to work and receive a reasonable salary with typical perks and benefits.
No. Employees have a beneficial interest in the ESOP not direct stock ownership. Therefore, employees do not have the right to see corporate financials or any other confidential corporate documents.
Many banks are very willing to lend for ESOP purposes. ESOP loans are not unlike the cash flow and collateral requirements of any other business loan. Additionally, BTA employs creative techniques to significantly reward sellers for taking a seller note for sale amounts in excess of what the bank will lend.
No catch. ESOPs have been around for nearly 40 years primarily based on the regulations found in the Employee Retirement Income Security Act of 1974 (ERISA). ESOPs are overseen by both the Department of Labor and the IRS. BTA obtains a “Letter of Determination” from the IRS on every ESOP we install.
BTA-ESOP-booklet
Download Our ESOP Client Brochure
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Where Are ESOPs Located

The Midwestern U.S. is home to the greatest number of ESOPs, followed by the South. Credit NCEO

Table 2: ESOPs by location

StateNumber of ESOPs Total Participants
Northeast1,107 3,347,434
New England 3091,080,874
Connecticut77714,337
Maine256,609
Massachusetts130133,304
New Hampshire 336,417
Rhode Island15214,729
Vermont295,478
Middle Atlantic7982,266,560
New Jersey 155751,312
New York 3311,117,611
Pennsylvania312397,637
Midwest2,1203,384,577
East North Central1,2132,280,601
Indiana171130,448
Illinois362926,527
Michigan215276,497
Ohio287757,966
Wisconsin178189,163
West North Central9071,103,976
Iowa17483,872
Kansas10765,873
Minnesota275790,265
Missouri19696,765
Nebraska7531,378
North Dakota5629,467
South Dakota246,356
South1,9735,476,581
South Atlantic1,0032,824,958
Delaware860,636
District of Columbia1510,124
Florida181530,203
Georgia145555,465
Maryland135325,103
North Carolina126739,306
South Carolina6242,550
Virginia302557,143
West Virginia294,428
East South Central347382,136
Alabama6945,103
Kentucky111134,263
Mississippi5628,046
Tennessee111174,724
West South Central6232,269,487
Arkansas581,281,274
Louisiana8240,925
Oklahoma8956,569
Texas394890,719
West1,5121,841,604
Mountain420151,161
Arizona10843,738
Colorado11033,926
Idaho3022,397
New Mexico436,919
Montana326,200
Utah5726,876
Nevada258,904
Wyoming152,201
Pacific1,0921,690,443
Alaska261,870
California8191,121,759
Hawaii6515,779
Oregon7563,699
Washington107487,336

What Kinds of Companies Have ESOPS?

Industries of ESOP Sponsors Credit NCEO
Manufacturing
22%
Professional / Scientific / Technical Services
18%
Finance / Insurance / Real Estate
17%
Construction
11%
Wholesale Trade
9%
Retail Trade
6%
Agriculture / Mining / Utilities
3%
Services
2%
Health Care
2%
Waste Management
2%
Health Care
2%
Waste Management
2%
Transportation
2%
Information / Technology
1.7%
Other
0.6%

Videos

All Things Financial ESOP Transition Part

Dan provides an overview of the history, intent and government position on Employee Stock Ownership Plans (ESOPs) as well as a profile of the typical ESOP candidate. Additionally, a summary of the four major tax advantages and the advantages to the seller, employees, company and community will be addressed.

All Things Financial ESOP Transition Part 2

Dan explains step by step how an ESOP works, how employees get company shares and how they cash in. Also, a more detailed look at the four significant tax advantages available to the sellers and/or the company will be discussed.

All Things Financial ESOP Transition Part 3

Dan provides a brief summary of the previous two ESOP sessions then dives into the important areas of corporate control, employee involvement, stock sale valuation, ESOP Trustee role, sale terms, board makeup and government oversight and regulations.

All Things Financial ESOP Transition Part 4

The final session discusses how the ESOP transaction is paid for through tax savings as well as the roles of senior bank financing and seller financing. The conversation also explores the current interest rate environment as well as significant seller incentives for bearing seller debt for the difference between bank financing and the sale price.

An Introduction to Employee Stock Ownership Plans (ESOPs)

LOOKING TO ESTABLISH YOUR ESOP?

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