ESOPs

Chapter 8

Administration and Transaction Considerations

Employee stock ownership plan (ESOP) transactions often appear to be very complex because of the substantial planning that is entailed with the initial installation and the significant amount of detail that must be addressed by the company long term. This chapter will briefly examine a number of the major administrative issues to be addressed as the ESOP is being considered. The topics include performing a feasibility study (always advised), planning executive compensation, obtaining a stock valuation, and considering the stock repurchase obligation.

Initial ESOP Considerations and Feasibility Study

Most typically, business owners are attracted to the idea of an ESOP because they have heard about the tax incentives centered on their creation. Another leading source for interest is that business owners are attracted to the idea of passing an equity interest to their employees. Regardless of the reasons, when initial inquiry turns into more serious analysis, the issues surrounding the installation of an ESOP can become complex. There are many points of interest in an ESOP installation, including those of the business owner, the employees, and federal oversight agencies.

Team of Advisors

An ESOP installation is often a complex transaction that requires a number of professional service disciplines. It is emphasized that some professionals are able to provide more than one of the services required for the ESOP. In other instances, ...