What is an ESOP?

An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan for employees and a tax-efficient exit strategy for business owners. ESOPs allow owners of closely held businesses to sell part or all of their shares to employees. When structured properly, owners can also manage capital gains taxes associated with the sale.

Benefits of an ESOP the Business Owner 

For business owners, an ESOP can:

  • Potentially yield higher after-tax proceeds compared to a third-party sale
  • Increase the certainty of closing the deal
  • Allow the owner to preserve their legacy while transitioning out
  • Offer the ability to remain involved in company management post-sale
  • Maintain confidentiality throughout the process
  • Provide an exit strategy when other buyers are not interested
  • Be structured as a series of transactions over time