Employee Stock Ownership Plans ESOPs 101

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Employee Stock Ownership Plans ESOPs 101"

Transcription

1 Employee Stock Ownership Plans ESOPs 101 BTA INC 2013

2 Complete Turn Key Services Full Service ESOP Implementation Services Preliminary Analysis Feasibility Studies Valuation Consulting Plan and Transaction Design Financing Repurchase Liability Studies Employee Communications Post Transactional Services

3 Team Approach Insurance Investments * Plan Design ERISA Counsel * Banker Estate Planning Trustee* Leader Team Leader Stock Valuation* TPA* Employee Communication Corporate Counsel Repurchase Obligation Company CPA * *Outside service provider

4 Providing services in all 50 states Drawing on 75 years of combined team experience In the last 5 years BTA has worked with: Over 8,100 employees 455 stockholders Market values of over $1.76 BILLION DOLLARS!

5 What is an ESOP? Employee Stock Ownership Plan A tax qualified defined contribution employee retirement plan Qualifies under IRC Section 401(a) and Section 4975(e)(7) Overseen by the IRS and the Department of Labor

6 ESOP Statistics Modern ESOPs came into being with passage of ERISA ,000 ESOP companies in America today Almost 1 trillion in assets held This includes large and small companies 21% of all U.S. private sector workers own company stock 72% of The ESOP Association s members have less than 250 employees

7 Unique Features Since Congress believes having employees accumulate retirement income is beneficial to society, it provides 3 major tax incentives to ESOP s: 1. Stock sold to ESOPs can qualify to defer/avoid capital gains tax 2. Company can receive dollar for dollar deduction for stock sold to the ESOP 3. Company can become State & Federal income tax free

8 Unique Features Must invest primarily in employer stock Can use borrowed funds (leverage) No employee contributions generally allowed Contributions can vary year to year, unless borrowed funds are used

9 Uses of ESOPs Business owner exit strategy/next generation transfer Liquidity/diversification for closely held stock Partner buy out Desire for employee owned culture Divorces/immediate cash needs Enhanced employee benefits/handcuffs Mergers & acquisitions

10 Owner Transition Concerns Minimize personal and corporate taxes Leave corporation with proper working capital and manageable, if any, debt Asset liquidity and diversification Convert business to retirement income Preserve family/community legacy Exit with the most after-tax dollars possible

11 Comparing Options All traditional sale methods use after-tax dollars ESOP s utilize pre-tax dollars

12 Comparing Options $10,000,000 Business Value Management Buy-Out/ Corporate Redemption $16,666,000 Earnings Required $6,666,000 Corporate Tax $2,920,000 Capital Gains Tax $7,080,000 Net to Seller $0 Tax Savings ESOP $10,000,000 Earnings Required $10,000,000 Deduction $4,000,000 Corp. Tax Savings $10,000,000 Net to Seller Approx. $10mm Tax Savings Assuming 40% Combined Federal & State Tax Rate Assuming 29.2% Avg. Combined Federal & State Capital Gains Tax Rate

13 How an ESOP Works: Step 1

14 How an ESOP Works: Step 2 LENDER LOAN COMPANY LOAN ESOP TRUST

15 How an ESOP Works: Step 3 LENDER LOAN COMPANY LOAN ESOP TRUST CASH STOCK IRC 1042 (C Corp) CASH SELLING SHAREHOLDER

16 How an ESOP Works: Step 4 LENDER LOAN PAYMENT COMPANY LOAN PAYMENT ESOP TRUST CASH CASH STOCK SELLING SHAREHOLDER

17 How an ESOP Works: Step 5 LENDER LOAN PAYMENT COMPANY LOAN PAYMENT ESOP TRUST CASH EMPLOYEES BENEFICIAL OWNERSHIP CASH STOCK SELLING SHAREHOLDER

18 How an ESOP Works: Step 6 LOAN LOAN LENDER PAYMENT COMPANY PAYMENT ESOP TRUST CASH CASH INTEREST CASH SINKING FUND DEATH DISABILITY RETIREMENT TERMINATION DIVERSIFICATION EMPLOYEES STOCK SELLING SHAREHOLDER

19 IRC 1042 Tax Deferral Selling shareholder may elect to indefinitely defer all capital gains on sale proceeds regardless of basis Similar to real estate provision IRC 1031 and life insurance IRC 1035 Financial products specifically made to facilitate liquidity of IRC 1042 assets

20 Qualified Replacement Property (QRP) Eligible Ineligible Common Stock Municipal Bonds Preferred Stock US Govt. Bonds Convertible Bonds Mutual Funds Corporate Fixed Rate Bonds Foreign Securities Corporate Floating Rate Notes REITs, Bank CDs Note: Eligible issuer must have 50% of its assets used in the active conduct of trade or business and no more than 25% of its gross income from passive sources

21 Leveraged QRP Strategy Proceeds From Sale (1042) CASH Portfolio Floating Rate Notes Balance Income with Interest QRP can be margined to 90% Margin Account Liquid Cash New Home Car Boat Stocks Bonds

22 100% S Corporation ESOP Pays no Federal or State corporate income tax to the extent ESOP owned Taxation is passed through to shareholders in proportion to ownership An ESOP is tax exempt, therefore no tax is paid on percentage owned by the ESOP Corp does not have to distribute income Exempt from prohibited transaction rules

23 Taxation of S Corporations: Before ESOP The Company CPA Prepares Form K-1 K-1 Goes to the Owner The Shareholder Files 1040 Pays Tax

24 Taxation of S Corporations: After Sale to ESOP The Company CPA Prepares Form K-1 K-1 Goes to the Owner ESOP The Shareholder Files 5500 Pays NO Tax Note: Cash can stay in the company

25 Corporate Governance If you control the Board of Directors, you control the company Shareholders Elect the Board of Directors Board of Directors appoints the Officers Officers responsible for day-to-day operations

26 Control: Unchanged In An ESOP: Current Owner Votes Board of Directors Appoints Directed Trustee

27 ESOP Employee Interest The directed trustee votes the stock on behalf of the employees The employees only have a beneficial interest in the ESOP trust Employees advise trustee only on mergers, sale, recapitalization or liquidation Employees are not shareholders and do not have Statutory Minority Shareholder Rights

28 Qualitative Benefits Golden handcuffs for key people Reduced turnover Reduced worker comp claims Greater productivity Greater profitability Greater commitment to the company Better work environment

29 Summary of Tax Benefits Deferral and/or avoidance of capital gains taxes on the sale of stock Deduction of the full Fair Market Value of the stock purchased by the ESOP Possibility of becoming tax free as a 100% S Corporation ESOP

30 How Do We Finance the Buy Out? Bank financing Seller financing Combination of bank and seller financing Significant incentives for seller

31 Financing Structure: Need to Finance 100% L E N D 2-3 X E B I T D A S E N I O R B A N K D E B T 40 60% O F T H E E Q U I T Y

32 Financing Structure: Need to Finance 100% F R O M P R I V A T E E Q U I T Y - E X P E N S I V E 12-14% M E Z Z A N I N E F I N A N C I N G 20 30% S E N I O R B A N K D E B T

33 Financing Structure: Need to Finance 100% V. C. C A N B E E V E N M O R E E X P E N S I V E 2 0 % + V E N T U R E C A P I TA L 20 30% M E Z Z A N I N E F I N A N C I N G 20 30% S E N I O R B A N K D E B T 40 60% 100%

34 BTA Recommended Structure The Seller is entitled to a Market Rate of Interest Instead of going to the market for all the financing, we recommend the seller take a note for everything above senior debt The interest rate can be adjusted to suit the sellers goals, company cash flow and maintain payment flexibility

35 BTA Recommended Financing Structure B L E N D E D R A T E 14-15% S E L L E R T O A C C E P T S E L L E R N O T E 3-5% L E N D 2-3 X E B I T D A S E N I O R B A N K D E B T 40 60% T O T A L E Q U I T Y

36 Why will the seller accept senior debt interest rate? Facilitate the transaction Protect company s viability Maximize current cash flow Maximize flexibility Reduce income taxation Warrants or equity sweeteners (PIK)

37 Seller Financing: Warrants Right to purchase company stock at a future date at a fixed price Exercise price is Post Transaction stock value Must be valued by qualified valuator Gives the Seller 2 nd bite of the apple Warrants can be given or gifted to management or family members

38 Seller Financing: Warrants Since the Seller is willing to accept a lower rate of interest on the seller note portion, warrants are issued to make up the difference for the lower interest rate Warrants issued can be 25-35% of the total equity of the company

39 Estate Planning Opportunities Warrants may be worth very little at the time of issuance Can be transferred to the next generation with little or No Estate or Gift Tax Seller s subordinated note is subject to significant discounting for estate and gift tax purposes Use of GRATs, GRUTs CRTs or IDITs around the note, may reduce the value to near zero for estate and gift tax purposes

40 Summary Owner sold stock for FMV Received some cash (bank loan or co.) Note for the mezz. & V.C. Piece Long term interest income Deferred or avoided capital gains tax Control retained Salary, perks & benefits 25%-35% of company in warrants Estate planning benefits Company is tax free

41 ESOP Steps 1. Initial complimentary review of Fact Finder and three years financials 2. Preliminary analysis & preliminary valuation 3. Feasibility study 4. ESOP implementation

42 Win-Win-Win For Everyone Business owners Employees Corporations More advantageous than any other single vehicle

Selling to an ESOP: A Step-by-Step Guide

Selling to an ESOP: A Step-by-Step Guide Vermont Employee Ownership Center Annual Conference June 8, 2012 Selling to an ESOP: A Step-by-Step Guide Tabitha Croscut, Esq. Steiker, Fischer, Edwards & Greenapple, P.C. & SES Advisors, Inc. 1 Agenda

More information

Business Succession Planning With ESOPs

Business Succession Planning With ESOPs acumen insight Business Succession Planning With ESOPs Presented by Alan Taylor, CPA Partner ideas attention reach expertise depth agility talent Disclaimer Information contained herein is of a general

More information

An Alternative to Selling Your Business: Employee Stock Ownership Plan

An Alternative to Selling Your Business: Employee Stock Ownership Plan An Alternative to Selling Your Business: Employee Stock Ownership Plan JANUARY 22 nd Sheraton Columbia Town Center Hotel 10207 Wincopin Circle Columbia, MD 21044 Steven B. Greenapple, Esq. Shareholder

More information

Moss Adams Introduction to ESOPs

Moss Adams Introduction to ESOPs Moss Adams Introduction to ESOPs Looking for an exit strategy Have you considered an ESOP? Since 1984, we have performed over 2,000 Employee Stock Ownership Plan (ESOP) valuations for companies with as

More information

ESOPs in Business Succession and Estate Planning

ESOPs in Business Succession and Estate Planning 2009 NCEO/Beyster Institute Employee Ownership Conference ESOPs in Business Succession and Estate Planning Bob Gross Senior Managing Director Oakbrook Terrace, Illinois 630-443-9933 Marc Schechter Attorney

More information

What is an ESOP? ESOPs are defined contribution pension plans that invest primarily in the stock of the plan sponsor

What is an ESOP? ESOPs are defined contribution pension plans that invest primarily in the stock of the plan sponsor Employee Stock Ownership Plans May 2013 http://aicpa.org/ebpaqc ebpaqc@aicpa.org Topix Primer Series The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) has developed this primer to provide Center

More information

ADVANCED ESOP STRATEGIES: OPTIONS AND ALTERNATIVES

ADVANCED ESOP STRATEGIES: OPTIONS AND ALTERNATIVES Welcome to ADVANCED ESOP STRATEGIES: OPTIONS AND ALTERNATIVES Presented by www.menke.com 1 Today s Agenda Introduction Basic ESOP Transactions Advanced ESOP Transactions Tax Considerations Financing Considerations

More information

An Instrument of Corporate Finance

An Instrument of Corporate Finance An Instrument of Corporate Finance Year-End Seminar Doing Business in Central Pennsylvania and Beyond November 12, 2014 Edward C. Renenger ecr@stevenslee.com A STEVENS & LEE/GRIFFIN COMPANY Introduction

More information

An ESOP is a very flexible instrument that uses tax-deductible or tax-free dollars to achieve a variety of corporate objectives, as outlined below:

An ESOP is a very flexible instrument that uses tax-deductible or tax-free dollars to achieve a variety of corporate objectives, as outlined below: Summary of ESOP Uses An ESOP is a very flexible instrument that uses tax-deductible or tax-free dollars to achieve a variety of corporate objectives, as outlined below: 1. Provide a market (at fair-market

More information

Liquidity & Succession Planning Using ESOPs The State of the Market

Liquidity & Succession Planning Using ESOPs The State of the Market Liquidity & Succession Planning Using ESOPs The State of the Market William E. O Brien Corporate Client Group Director Senior Vice President / Financial Advisor The O Brien Group at Morgan Stanley Since

More information

The Potential Advantages of an Employee Stock Ownership Plan (ESOP)

The Potential Advantages of an Employee Stock Ownership Plan (ESOP) The Potential Advantages of an Employee Stock Ownership Plan () Presented by: Ronald J. Gilbert, President Services, Inc., Scottsville, Virginia 4:30 p.m. - 6:00 p.m., Sunday, October 16, 2005 Ft. Lauderdale,

More information

Business Valuation and Exit Planning. Aaron J. Pryor, CFA, ASA

Business Valuation and Exit Planning. Aaron J. Pryor, CFA, ASA Business Valuation and Exit Planning Aaron J. Pryor, CFA, ASA Phases of a Business Valuation Assignment Define the valuation assignment What exactly is the subject of the valuation What is the purpose

More information

EMPLOYEE STOCK OWNERSHIP PLANS

EMPLOYEE STOCK OWNERSHIP PLANS EMPLOYEE STOCK OWNERSHIP PLANS AN EXTRAORDINARY FINANCIAL AND EMPLOYEE BENEFIT TOOL FOR THE CLOSELY-HELD COMPANY Copyright 2015 Olson Mills Law Firm, LLC All Rights Reserved PART TOPIC PAGE INTRODUCTION...1

More information

Introduction. David R. Johanson Johanson Berenson LLP

Introduction. David R. Johanson Johanson Berenson LLP Introduction David R. Johanson Johanson Berenson LLP Perhaps the most powerful tax and business succession planning tool available to shareholders of a closely held company is the ability to sell stock

More information

GETTING THE MOST OUT OF YOUR ESOP

GETTING THE MOST OUT OF YOUR ESOP GETTING THE MOST OUT OF YOUR ESOP Michael G. Keeley Hunton & Williams LLP 1445 Ross Avenue Suite 3700 Dallas, Texas 75202 (214) 468-3345 mkeeley@hunton.com Traditional Sources of Capital for Community

More information

Converting Business Equity Into Diversified Assets

Converting Business Equity Into Diversified Assets Converting Business Equity Into Diversified Assets Joe Wisniewski President & CEO (415) 898-5888 Paul Wiest COO & Managing Director-Southwest (480) 747-5035 What if there were a way for the owner of a

More information

Contents. Define ESOP 3. ESOP Advantages 4. Creating an ESOP 5. ESOP Tax Advantages 6. ESOP Laws 7. ESOP Rollover (Section 1042) 8.

Contents. Define ESOP 3. ESOP Advantages 4. Creating an ESOP 5. ESOP Tax Advantages 6. ESOP Laws 7. ESOP Rollover (Section 1042) 8. ESOPs Contents Define ESOP 3 ESOP Advantages 4 Creating an ESOP 5 ESOP Tax Advantages 6 ESOP Laws 7 ESOP Rollover (Section 1042) 8 ESOP Valuation 9 ESOP Distribution 10 Repurchase Obligation 11 Disadvantages

More information

Welcome and thank you for joining! The webinar will begin shortly.

Welcome and thank you for joining! The webinar will begin shortly. Welcome and thank you for joining! The webinar will begin shortly. 1 ESOPs 101 (What/Why/How) Mark R. Kossow Paul S. Fusco Boylan, Brown, Code, Vigdor & Wilson, LLP 2400 Chase Square Rochester, New York

More information

Employee Stock Ownership Plans ("ESOPs") Michael J. Canan, Shareholder GrayRobinson, P.A. Orlando

Employee Stock Ownership Plans (ESOPs) Michael J. Canan, Shareholder GrayRobinson, P.A. Orlando Employee Stock Ownership Plans ("ESOPs") Michael J. Canan, Shareholder GrayRobinson, P.A. Orlando In appropriate situations, ESOPs can be extremely effective tools for transferring ownership interests

More information

ESOP OPPORTUNITIES WHITE PAPER

ESOP OPPORTUNITIES WHITE PAPER ESOP OPPORTUNITIES WHITE PAPER This White Paper contains an overview of the Exit Planning Process. We have White Papers describing, in detail, many of its elements. Please contact the advisor who gave

More information

The ESOP Business Model. February 2013

The ESOP Business Model. February 2013 The ESOP Business Model February 2013 Topics to be Covered + Purpose and Regulatory Environment + Major Benefits of ESOPs + ESOP Transactions + Business Valuation Standards + ESOP Accounting Rules + ESOP

More information

Employee Stock Ownership Plans for Banks and Bank Holding Companies The Tax-Exempt Stock Market

Employee Stock Ownership Plans for Banks and Bank Holding Companies The Tax-Exempt Stock Market Employee Stock Ownership Plans for Banks and Bank Holding Companies The Tax-Exempt Stock Market Presenters: W. William Gust, J.D., LLM President of Corporate Capital Resources, LLC Michael A. Coffey Managing

More information

Employee Stock Ownership Plans (ESOPs) Introduction

Employee Stock Ownership Plans (ESOPs) Introduction Course Objective This course was created to teach advisors (CPAs, EAs, accountants, attorneys, financial planners, and insurance advisors) about ESOPs, which is a topic that has a mistaken reputation for

More information

ESOP LOGIC. How to Cash Out Tax-Free and Still Keep Your Business. A Practical Guide for Business Owners and Their Advisors. www.morganlewis.

ESOP LOGIC. How to Cash Out Tax-Free and Still Keep Your Business. A Practical Guide for Business Owners and Their Advisors. www.morganlewis. ESOP LOGIC How to Cash Out Tax-Free and Still Keep Your Business A Practical Guide for Business Owners and Their Advisors David Ackerman John A. Kober ESOP LOGIC TABLE OF CONTENTS INTRODUCTION THE MAGIC

More information

ESOPs can provide liquidity for business owners and trusts that hold closely held businesses. Non-tax advantages of selling to an ESOP include:

ESOPs can provide liquidity for business owners and trusts that hold closely held businesses. Non-tax advantages of selling to an ESOP include: Know your value Benefits of ESOPs An ESOP (Employee Stock Ownership Plan) is an employee benefit plan that makes the employees of a company beneficial owners of stock in that company. The tax code has

More information

ESOP CONNECT MANAGING THE ESOP REPURCHASE OBLIGATION. A company sponsoring an ESOP must make a market for vested plan participants.

ESOP CONNECT MANAGING THE ESOP REPURCHASE OBLIGATION. A company sponsoring an ESOP must make a market for vested plan participants. ESOP CONNECT MANAGING THE ESOP To ensure the success of an Employee Stock Ownership Plan (ESOP) as an employee motivational tool and as a means of corporate finance and succession planning, a company sponsoring

More information

ESOP CONNECT. THE RESURGENCE OF THE NON-LEVERAGED ESOP Daniel M. Zugell, CLU, ChFC, LUTCF, Ambassador

ESOP CONNECT. THE RESURGENCE OF THE NON-LEVERAGED ESOP Daniel M. Zugell, CLU, ChFC, LUTCF, Ambassador ESOP CONNECT THE RESURGENCE OF THE NON-LEVERAGED ESOP Daniel M. Zugell, CLU, ChFC, LUTCF, Ambassador A discussion regarding Employee Stock Ownership Plans (ESOPs) must contain the obligatory ESOP basics,

More information

Information and Frequently Asked Questions for Employee Stock Ownership Plan (ESOP) Participants

Information and Frequently Asked Questions for Employee Stock Ownership Plan (ESOP) Participants Information and Frequently Asked Questions for Employee Stock Ownership Plan (ESOP) Participants An Opportunity to Take Part in Your Company's Success If you ve been invited to participate in your company

More information

ESOP Business Planning Group

ESOP Business Planning Group ESOP SOLUTIONS Services to Companies Provide initial feasibility analysis and transaction planning Recommend ESOP professional team members Negotiate and implement ESOP financing Coordinate ESOP implementation

More information

Section 1042: A tax deferred sale to an ESOP

Section 1042: A tax deferred sale to an ESOP Section 1042: A tax deferred sale to an ESOP Nick J. Francia Christopher T. Horner Thomas Roback, CEP, QKA UBS Financial Services Dickinson Wright Blue Ridge ESOP Associates The Capital ESOP Group Attorney

More information

Financial Planning. One afternoon, your client, Fred. Using ESOPs for Business and Retirement Planning

Financial Planning. One afternoon, your client, Fred. Using ESOPs for Business and Retirement Planning VOL. CLXXV NO. 12 INDEX 1176 MARCH 22, 2004 ESTABLISHED 1878 Financial Planning Using ESOPs for Business and Retirement Planning A powerful and flexible tool that helps a retiring shareholder sell his

More information

Should Your S Corporation Adopt An ESOP?

Should Your S Corporation Adopt An ESOP? Should Your S Corporation Adopt An ESOP? Kevin G. Long The significant tax savings currently heralded in the tax press for S corporations that use an ESOP depend on the strategy for the use of the ESOP,

More information

Identifying ESOP Opportunities

Identifying ESOP Opportunities Identifying ESOP Opportunities Thomas Roback, Jr., CEP, QKA Managing Director Blue Ridge ESOP Associates 434.220.7947 troback@blueridgeesop.com October 26. 2014 I. About Blue Ridge ESOP Associates 1 Over

More information

EMPLOYEE STOCK OWNERSHIP PLANS

EMPLOYEE STOCK OWNERSHIP PLANS EMPLOYEE STOCK OWNERSHIP PLANS AN EXTRAORDINARY FINANCIAL AND EMPLOYEE BENEFIT TOOL FOR THE CLOSELY-HELD COMPANY Ice Miller LLP Legal Counsel 2013 Ice Miller LLP All Rights Reserved TABLE OF CONTENTS PART

More information

What is an Employee Stock Ownership Plan (ESOP)?

What is an Employee Stock Ownership Plan (ESOP)? What is an Employee Stock Ownership Plan (ESOP)? An ESOP is a Tax Qualified, Defined Contribution Plan, governed by the Internal Revenue Service and Department of Labor that was put into law under the

More information

A look at the good, the bad, and the ugly of an Employee Stock Ownership Plan

A look at the good, the bad, and the ugly of an Employee Stock Ownership Plan Institutional Retirement and Trust A look at the good, the bad, and the ugly of an Employee Stock Ownership Plan Employee Stock Ownership Plans (ESOPs) are unique among retirement plans. An ESOP merges

More information

Restricted Stock Plans

Restricted Stock Plans Restricted Stock Plans Key Employee Incentives Some S and C Corporation Considerations Michael A. Coffey Lisa J. Tilley, CPA P.O. Box 12025 Roanoke, VA 24022-2025 Phone: (540) 345-4190 1-800-358-2116 Fax:

More information

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS) MARC S. SCHECHTER ROBERT K. BUTTERFIELD ATTORNEYS AT LAW BUTTERFIELD SCHECHTER LLP ATTORNEYS & COUNSELORS

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS) MARC S. SCHECHTER ROBERT K. BUTTERFIELD ATTORNEYS AT LAW BUTTERFIELD SCHECHTER LLP ATTORNEYS & COUNSELORS EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS) MARC S. SCHECHTER ROBERT K. BUTTERFIELD ATTORNEYS AT LAW BUTTERFIELD SCHECHTER LLP ATTORNEYS & COUNSELORS Butterfield Schechter LLP was founded in 1998 by Robert

More information

CONSIDERATIONS IN ESTABLISHING A LEVERAGED ESOP

CONSIDERATIONS IN ESTABLISHING A LEVERAGED ESOP AUTHOR John A. Wilhelm, Partner Venable, LLP 8010 Towers Crescent Drive Suite 300 Vienna, VA 22182 PH: 703.760.1917 FAX: 703.821.8949 JAWilhelm@Venable.com CONSIDERATIONS IN ESTABLISHING A LEVERAGED ESOP

More information

ADAMS CO. Who s going to own your business after you? Review of Buy/Sell/Keep Alternatives Structure, Valuation, and Funding

ADAMS CO. Who s going to own your business after you? Review of Buy/Sell/Keep Alternatives Structure, Valuation, and Funding HDaroff@BaystateFinancialPlanning.com www.baystatefinancialplanning.com Who s going to own your business after you? Review of Buy/Sell/Keep Alternatives Structure, Valuation, and Funding ADAMS CO. Business

More information

The ESOP Solution for Private Companies

The ESOP Solution for Private Companies The ESOP Solution for Private Companies An e-seminar presented by the Beyster Institute at the Rady School of Management University of California, San Diego Copyright 2006 Regents of the University of

More information

Succession Planning. Succession Planning. James F. Weber, CPA, CGMA Managing Member

Succession Planning. Succession Planning. James F. Weber, CPA, CGMA Managing Member James F. Weber, CPA, CGMA Managing Member This session is eligible for 1 Continuing Education Hour and 1 Contact Hour. To earn these hours you must: Have your badge scanned at the door Attend 90% of this

More information

EMPLOYEE STOCK OWNERSHIP PLANS

EMPLOYEE STOCK OWNERSHIP PLANS EMPLOYEE STOCK OWNERSHIP PLANS Donald C. Hess Taft, Stettinius & Hollister Cincinnati, Ohio I. What is an ESOP? A. An employee stock ownership plan ("ESOP") is a form of tax-qualified defined contribution

More information

SPDR Wells Fargo Preferred Stock ETF

SPDR Wells Fargo Preferred Stock ETF SPDR Wells Fargo Preferred Stock ETF Summary Prospectus-October 31, 2015 PSK (NYSE Ticker) Before you invest in the SPDR Wells Fargo Preferred Stock ETF (the Fund ), you may want to review the Fund's prospectus

More information

S CORPORATION ESOPS CREATE INVESTMENT, ACQUISITION, AND EXIT STRATEGY OPPORTUNITIES

S CORPORATION ESOPS CREATE INVESTMENT, ACQUISITION, AND EXIT STRATEGY OPPORTUNITIES ESOP Financial Advisory 3 S CORPORATION ESOPS CREATE INVESTMENT, ACQUISITION, AND EXIT STRATEGY OPPORTUNITIES FOR PRIVATE EQUITY GROUPS William W. Merten, Esq. M&A advisers are becoming increasingly familiar

More information

ANATOMY OF AN ESOP. Employee Stock Ownership Plans From the Perspective of the Business Owner

ANATOMY OF AN ESOP. Employee Stock Ownership Plans From the Perspective of the Business Owner ANATOMY OF AN ESOP Employee Stock Ownership Plans From the Perspective of the Business Owner MARK D. WELKER mark.welker@huschblackwell.com 816-983-8148 KCP-1712449-3 Copyright Mark D. Welker 1/23/09 TABLE

More information

INVESTMENT DICTIONARY

INVESTMENT DICTIONARY INVESTMENT DICTIONARY Annual Report An annual report is a document that offers information about the company s activities and operations and contains financial details, cash flow statement, profit and

More information

ESOP OVERVIEW. for Denver Estate Planning Council. November 12, 2015

ESOP OVERVIEW. for Denver Estate Planning Council. November 12, 2015 ESOP OVERVIEW for Denver Estate Planning Council November 12, 2015 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee,

More information

Transferring Your Company to Key Employees White Paper

Transferring Your Company to Key Employees White Paper Transferring Your Company to Key Employees White Paper Owners wishing to sell their businesses to management (key employees) face one unpleasant fact: their employees have no money. Nor can they borrow

More information

U.S. Department of Labor Sues Cactus Feeders, Inc. for Millions Over ESOP Plan What s the Beef?

U.S. Department of Labor Sues Cactus Feeders, Inc. for Millions Over ESOP Plan What s the Beef? washburnlaw.edu/waltr Article 2016-008 April 4, 2016 U.S. Department of Labor Sues Cactus Feeders, Inc. for Millions Over ESOP Plan What s the Beef? Roger A. McEowen Kansas Farm Bureau Professor of Agricultural

More information

ESOPs in 2014 Myths and Reality. Indiana Benefits Conference March 18, 2014

ESOPs in 2014 Myths and Reality. Indiana Benefits Conference March 18, 2014 ESOPs in 2014 Myths and Reality Indiana Benefits Conference March 18, 2014 What Is an ESOP? An Employee Stock Ownership Plan (ESOP) is an employee benefit plan that is designed to invest primarily in the

More information

Session 11 - Corporate formation

Session 11 - Corporate formation - Corporate formation Discuss corporate formation rules Examine the tax implications of incorporating a business Lokk at how a start-up might be structured Overview of Corporate Formation Rules Section

More information

Using ESOPS to Fund Owner Buyouts and Provide Business Capital

Using ESOPS to Fund Owner Buyouts and Provide Business Capital Using ESOPS to Fund Owner Buyouts and Provide Business Capital Harry I. Atlas John A. Wilhelm October 2012 1 What Is An ESOP An ESOP is a tax-qualified employee retirement plan (similar to a 401(k) plan).

More information

Section 1042: Sale of a Business to an ESOP

Section 1042: Sale of a Business to an ESOP Section 1042: Sale of a Business to an ESOP June 4, 2014 Jeremiah W. Doyle, IV Senior Vice President, Wealth Strategist Table of Contents Overview Qualified Replacement Property Investment Strategy Questions

More information

Transferring Business Assets

Transferring Business Assets Transferring Business Assets In the future, you may either want to transfer your business to heirs or sell your business to employees, competitors, or others. Planning for transfer of a family business

More information

Overview (continued)

Overview (continued) Overview Alternative Exit Strategies Criteria for Evaluating Alternatives Introduction to ESOPs Profile of an Ideal ESOP Candidate ESOP Corporate Governance How Does an ESOP Work? 1 Overview (continued)

More information

OWNERSHIP TRANSITION: IS AN ESOP THE RIGHT TOOL FOR YOUR COMPANY?

OWNERSHIP TRANSITION: IS AN ESOP THE RIGHT TOOL FOR YOUR COMPANY? OWNERSHIP TRANSITION: IS AN ESOP THE RIGHT TOOL FOR YOUR COMPANY? Chuck Coyne Managing Director Empire Valuation Consultants Joseph D. Verri Vice President Wealth Management Morgan Stanley Tabitha M. Croscut

More information

Paschall Truck Lines, Inc. Frequently Asked Questions Regarding our ESOP

Paschall Truck Lines, Inc. Frequently Asked Questions Regarding our ESOP Frequently Asked Questions Regarding our ESOP 1 Table of Contents Introduction to this FAQ... 4 1. Overview... 4 2. Purpose... 4 ESOP Basics... 5 3. What is an ESOP? What does ESOP stand for?... 5 4. What

More information

ESOPs--- ACCOUNTING ISSUES AND CONSIDERATIONS. Peter J. Chudyk Maloney + Novotny LLC Cleveland, Ohio

ESOPs--- ACCOUNTING ISSUES AND CONSIDERATIONS. Peter J. Chudyk Maloney + Novotny LLC Cleveland, Ohio ESOPs--- ACCOUNTING ISSUES AND CONSIDERATIONS Peter J. Chudyk Maloney + Novotny LLC Cleveland, Ohio HOW DOES A LEVERAGE ESOP WORK? Company forms an ESOP In order to effectuate the purchase, the Company

More information

This Webcast Will Begin Shortly

This Webcast Will Begin Shortly This Webcast Will Begin Shortly If you have any technical problems with the Webcast or the streaming audio, please contact us via email at: webcast@acc.com Thank You! Employee Stock Ownership Plans: Is

More information

FINANCIER 10QUESTIONS MANAGING REPURCHASE LIABILITY ARISING FROM AN ESOP JULY 2013 R E P R I N T F I N A N C I E R W O R L D W I D E.

FINANCIER 10QUESTIONS MANAGING REPURCHASE LIABILITY ARISING FROM AN ESOP JULY 2013 R E P R I N T F I N A N C I E R W O R L D W I D E. R E P R I N T F I N A N C I E R W O R L D W I D E. C O M PREPARED ON BEHALF OF 10QUESTIONS MANAGING REPURCHASE LIABILITY ARISING FROM AN ESOP REPRINTED FROM EXCLUSIVE ONLINE CONTENT PUBLISHED IN: JULY

More information

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs): A BUSINESS SUCCESSION PLANNING TOOL WORTH CONSIDERING

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs): A BUSINESS SUCCESSION PLANNING TOOL WORTH CONSIDERING EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs): A BUSINESS SUCCESSION PLANNING TOOL WORTH CONSIDERING By: Chuck Coyne, ASA Empire Valuation Consultants, LLC Tabitha Croscut, Esq. Steiker, Greenapple & Crosut,

More information

THE TAX-FREE SAVINGS ACCOUNT

THE TAX-FREE SAVINGS ACCOUNT THE TAX-FREE SAVINGS ACCOUNT The 2008 federal budget introduced the Tax-Free Savings Account (TFSA) for individuals beginning in 2009. The TFSA allows you to set money aside without paying tax on the income

More information

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market)

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market) University of California, Merced EC 121-Money and Banking Chapter 2 Lecture otes Professor Jason Lee I. Introduction In economics, investment is defined as an increase in the capital stock. This is important

More information

How It Works. Additional Considerations. The basics: The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions.

How It Works. Additional Considerations. The basics: The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions. The basics: The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions. How It Works Employer contributes company stock or cash to the plan. Employer contributions

More information

Employee Stock Ownership Plan (ESOP)

Employee Stock Ownership Plan (ESOP) Employee Stock Ownership Plan (ESOP) The basics: The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions. How It Works Employer contributes company stock or cash

More information

Vermont Employee Ownership Center. Sixth Annual Employee Ownership Conference. Financing an ESOP. Burlington, VT June 6, 2008

Vermont Employee Ownership Center. Sixth Annual Employee Ownership Conference. Financing an ESOP. Burlington, VT June 6, 2008 Vermont Employee Ownership Center Sixth Annual Employee Ownership Conference Financing an ESOP Burlington, VT June 6, 2008 Copyright 2008 by SES Advisors, Inc. All rights reserved. Program Agenda Basic

More information

New Legislation Enhances the Benefits of a Section 1042 Tax-Deferred Sale

New Legislation Enhances the Benefits of a Section 1042 Tax-Deferred Sale ESOP Transaction Insights New Legislation Enhances the Benefits of a Section 1042 Tax-Deferred Sale Michael R. Holzman, Esq., and Christopher T. Horner II, Esq. Recent legislation increased the income

More information

Hoss s Steak & Sea House, Inc. Employee Stock Ownership Plan (ESOP)

Hoss s Steak & Sea House, Inc. Employee Stock Ownership Plan (ESOP) Hoss s Steak & Sea House, Inc. Employee Stock Ownership Plan (ESOP) Michael P. Jewer & Associates, Inc. P. O. Box 599 Lititz, PA 17543-0599 Phone: 717-627-2433 Fax: 717-626-7220 www.michaelpjewerandassociates.com

More information

ESOPs and Estate Planning. Kelly O. Finnell, J.D., CLU, AIF President, Executive Financial Services, Inc.

ESOPs and Estate Planning. Kelly O. Finnell, J.D., CLU, AIF President, Executive Financial Services, Inc. ESOPs and Estate Planning Kelly O. Finnell, J.D., CLU, AIF President, Executive Financial Services, Inc. Next Big Estate Planning Opportunity Baby Boomer Business Owners 72% Planning for Monetization Event

More information

2015 Midwest ESOP Conference ESOP Essentials: ESOP Basics for New Participants

2015 Midwest ESOP Conference ESOP Essentials: ESOP Basics for New Participants 2015 Midwest ESOP Conference ESOP Essentials: ESOP Basics for New Participants Presented by: Jim Myott, J.D., CPA Boulay PLLP jmyott@boulaygroup.com Kevin Rusch, CPA, QPA Blue Ridge ESOP Associates KRusch@BlueRidgeESOP.com

More information

ESOP An Alternative Exit Strategy (while Maximizing Business Cash Efficiency)

ESOP An Alternative Exit Strategy (while Maximizing Business Cash Efficiency) ESOP An Alternative Exit Strategy (while Maximizing Business Cash Efficiency) Presented to : Givner & Kaye Copyright 2009 Corporate Solutions Group, LLC No part of this presentation may be reproduced,

More information

Educational Series. Supplemental Executive Retirement Plan (SERP)

Educational Series. Supplemental Executive Retirement Plan (SERP) Supplemental Executive Retirement Plan (SERP) Supplemental Executive Retirement Plans (SERP) Guide What is a Supplemental Executive Retirement Plan (SERP)? A supplemental executive retirement plan is a

More information

Session 4B ESOP Challenges Facing Senior Management Taking Care of Business

Session 4B ESOP Challenges Facing Senior Management Taking Care of Business Session 4B ESOP Challenges Facing Senior Management Taking Care of Business The ESOP Association California/Western States Chapter Conference October 5-7, 2011 Paradise Point Resort, San Diego Larry Goldberg

More information

PURCHASING REAL ESTATE IN A SELF DIRECTED IRA OR QUALIFIED PENSION PLAN. By Maurice M. Glazer, CEO GLAZER FINANCIAL NETWORK

PURCHASING REAL ESTATE IN A SELF DIRECTED IRA OR QUALIFIED PENSION PLAN. By Maurice M. Glazer, CEO GLAZER FINANCIAL NETWORK PURCHASING REAL ESTATE IN A SELF DIRECTED IRA OR QUALIFIED PENSION PLAN By Maurice M. Glazer, CEO GLAZER FINANCIAL NETWORK In today s market or lack of market, most baby boomers have most of their retirement

More information

A Comprehensive Guide to ESOPs

A Comprehensive Guide to ESOPs A Comprehensive Guide to ESOPs Audit Tax Advisory Risk Performance The Unique Alternative to the Big Four Crowe Horwath LLP Table of Contents Introduction... 3 What Is an ESOP?... 4 ESOPs as a Corporate

More information

Camille Kerr and Corey Rosen, National Center for Employee Ownership

Camille Kerr and Corey Rosen, National Center for Employee Ownership Camille Kerr and Corey Rosen, National Center for Employee Ownership Companies with 1,000 or fewer employees, almost all of which are closely held, provide almost 60% of all private sector jobs in the

More information

Public Financial Disclosure A Guide to Reporting Selected Financial Instruments

Public Financial Disclosure A Guide to Reporting Selected Financial Instruments Public Financial Disclosure A Guide to Reporting Selected Financial Instruments TABLE OF CONTENTS AMERICAN DEPOSITARY RECEIPT 1 CASH BALANCE PENSION PLAN 2 COMMON TRUST FUND OF A BANK 4 EMPLOYEE STOCK

More information

ESOP Advantage. Employee Stock Ownership Plan

ESOP Advantage. Employee Stock Ownership Plan ESOP Advantage Employee Stock Ownership Plan E The Smart Way to Structure Your Business The most important business move you ll ever make - could be your next one. If you are an entrepreneur launching

More information

Use this section to learn more about business loans and specific financial products that might be right for your company.

Use this section to learn more about business loans and specific financial products that might be right for your company. Types of Financing Use this section to learn more about business loans and specific financial products that might be right for your company. Revolving Line Of Credit Revolving lines of credit are the most

More information

Leveraged Employee Stock Ownership Plans. May 29, 2007 J. Todd Butler, Esq.

Leveraged Employee Stock Ownership Plans. May 29, 2007 J. Todd Butler, Esq. Leveraged Employee Stock Ownership Plans May 29, 2007 J. Todd Butler, Esq. LESOPs in General An employee stock ownership plan ( ESOP ) is a qualified retirement plan. The main difference between an ESOP

More information

Chapter 1 The Scope of Corporate Finance

Chapter 1 The Scope of Corporate Finance Chapter 1 The Scope of Corporate Finance MULTIPLE CHOICE 1. One of the tasks for financial managers when identifying projects that increase firm value is to identify those projects where a. marginal benefits

More information

VALUATION observations

VALUATION observations November 2010 Vol. 2010-05 230 West Street Suite 700 Columbus, OH 43215 614.221.1120 www.gbqconsulting.com 111 Monument Circle Suite 500 Indianapolis, IN 46204 317.423.0150 www.gbqgoelzer.com VALUATION

More information

LIMITED LIABILITY COMPANIES

LIMITED LIABILITY COMPANIES LIMITED LIABILITY COMPANIES AGRICULTURAL APPLICATIONS PRESENTED BY KENT B MILLER EXTENSION AG ECONOMIST KS FARM MGT ASSOC SE 103 ½ E. 9 TH, SUITE 202 WINFIELD, KS 67156-2858 620-221-6906 kentfmse@yahoo.com

More information

Guide to Sources of Financing for Companies

Guide to Sources of Financing for Companies Guide to Sources of Financing for Companies By John A. Leonard Director, Fairfield and Woods, P.C. Below is a short guide to sources of financing for companies. Twenty-two sources of financing are listed,

More information

SPDR S&P 400 Mid Cap Value ETF

SPDR S&P 400 Mid Cap Value ETF SPDR S&P 400 Mid Cap Value ETF Summary Prospectus-October 31, 2015 Before you invest in the SPDR S&P 400 Mid Cap Value ETF (the Fund ), you may want to review the Fund's prospectus and statement of additional

More information

Business Succession Planning. 2011 Morgan Stanley Smith Barney LLC. Member SIPC

Business Succession Planning. 2011 Morgan Stanley Smith Barney LLC. Member SIPC 2011 Morgan Stanley Smith Barney LLC. Member SIPC 2011-PS-541 Expires: February 2012 Date of First Use: February 2011 Updated/Reviewed: February 2011 Overview Why Succession Planning is Important Common

More information

Incentive Stock Options

Incentive Stock Options Raymond James The Tyson Smith Group Tyson Smith Vice President 301 E. Pine Street Suite 1100 Orlando, FL 32801 407-648-4488 800-426-7449 tyson.smith@raymondjames.com www.thetysonsmithgroup.com Incentive

More information

Cassell Consulting Ltd. Mark Caster Susan Elliott

Cassell Consulting Ltd. Mark Caster Susan Elliott A presentation designed for: Cassell Consulting Ltd. and Mark Caster Susan Elliott Prepared by: Sun Life Sample Table of Contents This presentation contains 8 sections as follows: 1. Problem Description

More information

Grantor Retained Annuity Trusts

Grantor Retained Annuity Trusts Grantor Retained Annuity Trusts A GRAT may allow a person to share the future appreciation of an asset with the next generation with no gift tax. Executive Overview Transferring wealth can be a significant

More information

3/22/2011. Financing an ESOP Transaction. Table of Contents. I. The Leveraged ESOP Transaction. John L. Miscione Managing Director

3/22/2011. Financing an ESOP Transaction. Table of Contents. I. The Leveraged ESOP Transaction. John L. Miscione Managing Director Presented by John L. Miscione Managing Director Table of Contents I. The Leveraged ESOP Transaction II. ESOP Tax Benefits III. Debt Capacity IV. Financing Markets and Terms V. The Lender s Perspective

More information

2015 MDRT Annual Meeting e Handout Material. Key Concepts of Business Ownership Agreements

2015 MDRT Annual Meeting e Handout Material. Key Concepts of Business Ownership Agreements 2015 MDRT Annual Meeting e Handout Material Title: Speaker: Key Concepts of Business Ownership Agreements David T. Lyons, J.D., CPA Presentation Date: Tuesday, June 16, 2015 10:00 11:30 a.m. The Million

More information

Valuing S Corporation ESOP Companies

Valuing S Corporation ESOP Companies CHAPTER FOUR Valuing S Corporation ESOP Companies Kathryn F. Aschwald Donna J. Walker n January 1, 1998, corporations with employee stock ownership plans (ESOPs) became eligible to O elect S corporation

More information

KSOP Guide Introduction

KSOP Guide Introduction KSOP Guide Introduction Welcome to the Appleton family of companies. As an employee of Appleton, you have a unique ownership opportunity to invest your retirement savings in company stock. The KSOP is

More information

The Latest on Tax Issues in Structuring M&A Transactions Presented to: Colorado Bar Association CLE

The Latest on Tax Issues in Structuring M&A Transactions Presented to: Colorado Bar Association CLE The Latest on Tax Issues in Structuring M&A Transactions Presented to: Colorado Bar Association CLE John R. Maxfield Rob Mintz Denver, Colorado Michael A. Monson Billings, Montana March 5, 2013 Introduction

More information

Estate planning strategies using life insurance in a trust Options for handling distributions, rollovers and conversions

Estate planning strategies using life insurance in a trust Options for handling distributions, rollovers and conversions Estate planning strategies using life insurance in a trust Options for handling distributions, rollovers and conversions Life s better when we re connected Table of contents Find your questions review

More information

Redemption Approach to Leveraged ESOP Transactions

Redemption Approach to Leveraged ESOP Transactions Redemption Approach to Leveraged ESOP Transactions Scott D. Levine, CPA/ABV, CFA, ASA Managing Director Stout Risius Ross, Inc. Peter H. Briggs Managing Director Shareholder Strategies, Inc. CLASSIC LEVERAGED

More information

Incentive Stock Options

Incentive Stock Options JPH Advisory Group Curtis Hearn, CFP 600 Galleria Pkwy Ste 1600 Atlanta, GA 30339 770-859-0076 curtis@jphadvisory.com www.jphadvisory.com Incentive Stock Options Page 1 of 6, see disclaimer on final page

More information

Small Business Essentials: Bringing Business Law Down to Earth

Small Business Essentials: Bringing Business Law Down to Earth Small Business Essentials: Bringing Business Law Down to Earth A SERIES OFFERED BY Attorneys aren t from Mars. Business clients aren t from Venus. PRESENTED BY Business Risk Two phases of the business

More information

Step 1: Data Gathering Personal Factors John and Mary Client are both age 55

Step 1: Data Gathering Personal Factors John and Mary Client are both age 55 Step 1: Data Gathering Personal Factors John and Mary Client are both age 55 The Clients have three children: Junior, age 30; Anne, age 27, Carol, age24. All three children are married and have their own

More information