Book description
Changing demographics, impending changes in taxation, and challenging economic conditions have made ESOPs a creative strategy to ensure organization survival and success. This publication defines issues that must be fully considered before installing an ESOP, and highlights the common attributes of successful installations. Use this book to chart a course through succession issues and transition ownership issues with a minimum impact to financial results. The book offers you practical strategies to deal with current economic realities and taxation challenges, including the following:
- Increasing tax rates in the near future will make ESOPs a tax efficient option for business owners.
- In recessionary times ESOPs control the succession process versus letting probate and inheritance taxes jeopardize the survival of their organization.
- Financing for almost any business transaction is difficult; ESOPs are very seller finance friendly.
Table of contents
- Cover Page
- Title Page
- Copyright Page
- Contents
- Introduction
-
Chapter 1: Employee Stock Ownership Plan History and Background
- Overview of Employee Ownership and Employee Stock Ownership Plans
-
Legislative History
- Employee Retirement Income Security Act of 1974
- Revenue Act of 1978
- The Chrysler Loan Guarantee Act of 1979
- The Economic Recovery Tax Act of 1981
- Deficit Reduction Act of 1984
- Tax Reform Act of 1986
- Small Business Job Protection Act of 1996
- Taxpayer Relief Act of 1997
- The Economic Growth and Tax Relief Reconciliation Act of 2001
- Jobs and Growth Tax Relief Reconciliation Act of 2003
- Impact on ESOPs
- ESOPs Today
- Summary
- Chapter 2: Significant Events and Organizations
-
Chapter 3: Employee Stock Ownership Plan Transaction Mechanics
-
Traditional Uses of an ESOP
- Provide Liquidity and Diversification for Shareholders
- Provide a Means of Capital Formation
- Finance Corporate Acquisitions
- An Incentive to Increase Employee Productivity and Retain Personnel
- Provide a Succession Plan
- Provide Liquidity in Divorce Situations
- Provide Negotiating Leverage for Any Proposed Transaction
- Summary
- Alternatives to an ESOP
-
Basic Features of ESOPs
- Operating Considerations of an ESOP
- Contributions to an ESOP Are Tax Deductible Within Statutory Limits
- Contributions to an ESOP Based on Dividends (C Corporation)
- Contributions to an ESOP Based on Distributions (S Corporation)
- IRC Section 1042 Tax-Free Rollover (C Corporation)
- Nontaxable Income Related to ESOP Stock (S Corporation)
- Assets in ESOP Remain Untaxed Until Retirement
- Appendix 3A—Sample Documents Relating to the Internal Revenue Code Section 1042 Election
-
Traditional Uses of an ESOP
-
Chapter 4: Employee Stock Ownership Plan Transactions and C Corporations
-
Sample Facts—ABC, Inc. (C Corporation)
- Abbreviated Financial Statements
- FMV of Common Stock for the Purposes of an ESOP
- Common Entities in Transactions
- Example—Stock Contributed to ESOP (Capital Formation ESOP)
- Example—Leveraged ESOP With IRC Section 1042 Rollover
- IRC Section 1042 Restrictions
- Example—Prefunded ESOP With IRC Section 1042 Rollover
- IRC Section 1042 Restrictions
- Example—Leveraged ESOP With IRC Section 1042 Rollover and Control
- Example—Leveraged ESOP With IRC Section 1042 Rollover, Multiple Classes of Stock, and Control
- Summary
-
Sample Facts—ABC, Inc. (C Corporation)
-
Chapter 5: Employee Stock Ownership Plan Transactions and S Corporations
-
Sample Facts—ABC, Inc. (S Corporation)
- Abbreviated Financial Statements
- FMV of Common Stock for the Purposes of an ESOP
- Common Entities in Transactions
- Example—Stock Contributed to ESOP (Capital Formation ESOP)
- Example—Leveraged ESOP (Paying Capital Gains)
- Example—Prefunded ESOP With No Bank Debt
- Example—Convert to C Corporation—Leveraged SOP With IRC Section 1042 Rollover and Control
- IRC Section 1042 Restrictions
- Example—Leveraged Sale of 100 Percent to the ESOP in a Single Transaction
- Summary
-
Sample Facts—ABC, Inc. (S Corporation)
-
Chapter 6: Advanced Employee Stock Ownership Plan Applications
- Mergers and Acquisitions—Buying a Target Company With Pretax Dollars
- Mergers and Acquisitions—Extending the Internal Revenue Code Section 1042 Rollover to a Target Company
- Extending the IRC Section 1042 Rollover to an Investment in Another Closely Held Company
- Multiple Investor ESOPs
- Charitable Giving and ESOPs
- Summary
-
Chapter 7: Valuation Issues and Considerations
- Issues Regarding ESOP-Based Valuations
- Standard of Value
- Valuation Independence and SOX
- Valuation Perspective on the Repurchase Obligation and the Put Option
- Valuation Report Date and Events
- Approaches to Establishing Value
- Ownership Characteristics
- Leveraged ESOPs—Initial Valuation and Annual Updates
- Annual ESOP Update Issues
- Multi-Investor ESOPs and Allocation Considerations
- Practical Valuation Considerations
-
Chapter 8: Administration and Transaction Considerations
- Initial Considerations and ESOP Feasibility Study
- Strategic ESOP Design Considerations
- Senior Management Compensation and Incentives
- ESOP Trustee and Transaction Considerations
- ESOP Fairness Opinion
- Rights of ESOP Participants
- Stock Repurchase Obligation
- ESOP Termination
- Disadvantages of ESOPs
- Summary
- Chapter 9: Financial Considerations
- Chapter 10: Litigation and Significant Cases
- Chapter 11: Practical Considerations and Employee Stock Ownership Plan Resources
Product information
- Title: ESOPs
- Author(s):
- Release date: May 2017
- Publisher(s): Wiley
- ISBN: 9781937350543
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