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.

 
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How Does an ESOP Work?

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Money in Hand

Who is the buyer?

A trust representing at least 10 employees.

Price Tag

Who sets the price?

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

Dollar Bills

How is it funded?

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

Distribution

Who gets shares?

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

Growing Wealth

How is stock earned?

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

Piggy Bank

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?

 
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BUSINESS OWNERS

Selling shareholders gain liquidity & asset diversification

Can defer capital gains taxes on proceeds

Maintain upside & a meaningful role

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COMPANIES

Plan sponsors receive tax deductions on sale amount

Can become income tax-free entities

Get a tool to retain & attract talent

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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?

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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."

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