ESOP

ESOP’s Have Vulnerabilities Insure Against Them

ESOP’s are popular. In the U.S.there are approximately 11,500 ESOP’s, covering about 10 million employees (about 10% of the workforce).

An ESOP is an employee-owned company that offers a flexible, tax-favorable way for owners to exit the business, and provides strong retirement benefits for the employee-owners.

All of us at Global Investment Strategies work closely with many owners and ESOP companies.  Doug McClure, CEO of GIS, cited several reasons why ESOP’s are so popular.

• An ESOP creates an immediate market for the owner’s stock, and a buyer for the owner’s business.
• An ESOP locks in stock value, eliminating future valuation reductions due to ever changing business and regulatory factors.
• Owners can transition the business to the employees over time if desired.
• An ESOP is a business continuation strategy, keeping the brand name developed over years alive and well.
• ESOP tax advantages can greatly increase operational cash flow.
• For the family business, an ESOP can be an excellent tax beneficial succession planning tool to the next generation and key employees.
• Employees are active investors. Each employee works to increase the value of their company. When that value grows, the employee’s retirement funds grow.
• As a defined benefit program, an ESOP is a very attractive tool in recruiting and retaining high level talent.