An Introduction to ESOPs


Learn about the tax, liquidity, and legacy-building advantages of employee stock ownership plans.

Download our ESOP Quick Reference.

 

Employee Ownership Fundamentals

Employee stock ownership plans enable closely-held companies to sell equity, at a fair market value, to an employee trust.

This is not a stock option program. Instead, an ESOP is an ERISA-authorized, defined contribution plan.

 
HubSpot Video
 

How Does an ESOP Work?

_____

esop-buyer

Who is the buyer?

A trust representing at least 10 employees.

esop-who-sets-price

Who sets the price?

The price is negotiated with an institutional trustee, based on an independent valuation.

esop-how-is-it-funded

How is it funded?

Commercial and/or seller financing, paid-off with pre-tax corporate cashflow.

esop-who-gets-shares

Who gets shares?

Full-time employees are allocated shares proportional to their annual compensation.

esop-stock-earned

How is stock earned?

A portion of all shares is allocated annually; the shares vest within 3-6 years.

esop-cash-out

How do employees cash out?

Vested stock is sold back to the company, at a current valuation, when employees depart.

Who can Benefit from an Employee Ownership?

 
Business Owner

BUSINESS OWNERS

Selling shareholders gain liquidity & asset diversification

Can defer capital gains taxes on proceeds

Maintain upside & a meaningful role

Factory

COMPANIES

Plan sponsors receive tax deductions on sale amount

Can become income tax-free entities

Get a tool to retain & attract talent

Employees

EMPLOYEES

Employees secure a unique retirement benefit (company stock)

Earn real stake in their company

Gain workplace stability & peace of mind

Want to Learn More?

_____

Since 2000, CSG Partners' nationally-recognized, investment banking team has helped private companies capitalize on the benefits of ESOPs.

Join our founder, Larry Kaplan, for a compressive introduction to ESOPs. You'll learn more about key ESOP benefits, tax efficiencies, structures, valuations, financing, and typical "good fits."

HubSpot Video