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Company for Sale?

87516295The economy is slowing coming back.  People are beginning to realize that the values that existed before the crisis will not be seen again for some time.  The new values of homes, businesses and the stock market are not going to be over inflated as before.

Business owners that were thinking of selling their companies are starting to test the waters again.  The value of their businesses may not be what they once were and the values are based on a new market reality.  Owners are realizing that it is time to move forward.

When looking at the impact of our financial crisis and how it impacted everyone's net worth, employee ownership is one of the best ways to transfer ownership of a business.  One employee ownership methods for transitioning ownership of a business is an ESOP (Employee Stock Ownership Plan).  The following is a short list of the benefits of using an ESOP as a strategy for selling a business:

  • Owners of C corporations can realize significant tax savings if they sell at least 30 percent of the company to the ESOP.
  • S corporations that are 100 percent ESOP pay no corporate tax (providing certain state laws).
  • The equity of the business is spread broadly to all employee owners.
  • An ESOP is a qualified retirement plan that is governed by the DOL & IRS (giving some comfort to employee owners that there are rules to play by).
  • ESOP companies, with participatory cultures, will out perform their non-ESOP competitors
  • Employee owners have greater control over the value of their accounts in an ESOP as compared to an IRA or 401k.
  • The owner gets the satisfaction of sharing future equity with the employees who helped build the business.

Any business owner that is considering selling his or her business would be amiss to not evaluate if an ESOP would work for them.  There are many more benefits than those listed above and there are disadvantages that need to be considered.  An ESOP can provide benefits to the owner, the business and the current and future employees.

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