Posted by Matt Register

I’m going to talk about ESOP’s as a potential structure to be used by a business owner trying to sell his business. Why would you look at an ESOP, otherwise known as an employee stock ownership plan? Two major reasons.

One, legacy for your employees. Strategic and financial buyers often look to move businesses to make them more synergistic with other investments they have. If you form an ESOP, the company stays there, all those jobs stay there. All those people that helped you build that business, stayed there. Also there’s some empirical evidence that shows that employee owned companies do better and there’s fewer layoffs during recessions.

On a tax basis, the ESOP is a tax exempt entity. Therefore, no taxes are paid on the earnings that are generated through the company. This gives the company a significant advantage in terms of its cost of capital as it builds, as it builds its business going forward. Sellers can take advantage of certain other tax opportunities, such as a 1042 Exchange. So, from a ownership perspective, is something to really be considered. Particularly, if the business is a professional service business or has a specific contract with some vendor that they have to keep.

Sponsored in part by:
CFA Banner Ad
Rand 2
FizerBeck
UH Valenti School 1
UTSA 1
Vistage Jay 1
Primeway FCU
Dell 1
Salesforce Main
Mouth Marketing 1
About the Author
Matt Register

Matt Register

In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.

Sponsored in part by:
Nixon and Dovey
RREA Banner
SECREAL
WP Engine
Mailchimp
Bayou Graphix 1
Last Shadow
Valesco 1
Intero Advisory 1
Floorzone
Houston ISO9000
Recent Posts

Leave a Comment

Airtimes

 

×
Contact Us
  • This field is for validation purposes and should be left unchanged.
×