Your ESOP Questions Answered


Most employee ownership journeys begin with a question. Many common queries are about plan mechanics, formations, and ESOP management are covered below.

These include: 

» What are the key benefits of on an ESOP?

» How is an ESOP valuation determined?

» How is an employee-owned company managed?

Let's Clear Up Some Common ESOP Misconceptions

Employee stock ownership plans are complex financial transactions. As a result, there's plenty of confusion surrounding these benefit-rich programs.

Our founder, Larry Kaplan, explains the mechanics of an ESOP plan and walks you through the basic advantages and downsides of employee ownership in these brief videos.

Common ESOP Myths

ESOP Valuations, Financing & Governance

Assessing Fair Market Value

The Internal Revenue Service defines FMV as the price a company would sell for on the open market. “It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.”

Financing a Leveraged ESOP

Many commercial lenders are attracted to ESOPs. The associated tax incentives drive increased cash flow and employee-owned companies statistically outperform their peers. Senior debt, offered without personal guarantees, can often finance a sizable portion of a transaction.

Managing an Employee-Owned Company

If a company does not already have a board of directors in place, one will be established when an ESOP is formed. ESOP's trustee will have certain voting rights and take part in the election of a board's slate of members. The board maintains operational management of the company.

A Trustee's Fiduciary Responsibility

ESOP trustees are obligated to pay fair market value for a company's equity, to manage the trust's assets, and to conduct annual, independent stock valuations. A trustee also maintains the trust in accordance with the ESOP's plan documents and votes the trust's shares.