ESOP Blog

We have completed 350+ transactions with over $1.6 billion total assets under our administration.

Due Diligence in Employee Ownership Transactions

May 27, 2020

What does the term “due diligence” mean? Due diligence essentially is the process of investigating if there are any potential problems that could make a transaction problematic. Generally, the buying party (such as the ESOP trustee) requires due diligence work to uncover potential problems in the company whose stock is being bought. Examples of difficulties…

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How Long Does It Take to Set up an Employee Ownership Plan?

May 20, 2020

How long does it take to set up a leveraged ESOP? Typically, the set-up process taxes anywhere from six to nine months. We have heard of plans being set up in several weeks; some take as long as two years. Several steps are necessary to set up a plan. First, a valuation is needed for…

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How Much Does Setting Up an ESOP Cost?

May 13, 2020

The cost of setting up an ESOP varies considerably, and costs can range from $60,000 to hundreds of thousands of dollars (in 2015). There are several issues to consider: Attorney fees: The basic design of the plan itself – filing initial forms with the government, negotiating with lenders, performing due diligence, drawing up trust documents,…

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What Is Ownership Culture?

May 6, 2020

Just about every ESOP company wants to have employees who think and act like the employee-owners. Compelling research and decades of experience show that employee ownership is in fact a powerful tool to improve corporate performance – but only when companies have “ownership cultures” in which employees think and act like owners. There is a…

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United States District Court – Eastern District of North Carolina Renders Pro-ESOP Trustee Decision

April 29, 2020

In Lee v. Argent Trust Company, the district court dismissed the Plaintiff’s claim that Argent, as trustee of the Choate Construction Company ESOP, committed a fiduciary breach when it paid $198 million for the purchase of 100% of the company’s stock. The Plaintiff had alleged that she suffered damages because the ESOP’s stock was valued…

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Major Tax Benefits of ESOPs

April 22, 2020

ESOPs have several significant tax benefits, the most important of which are: 1. Contributions of stock are tax deductible: That means companies can get a current cash flow advantage by issuing new shares or treasury shares to the ESOP, although this means existing owners will be diluted. 2. Cash contributions are deductible: A company can…

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ESOPs Versus 401(k) Plans for Retirement Security*

April 15, 2020

ESOPs 401(k) Plans Contribution rate from company to the plan 6% to 8% of pay per year for all eligible employees. 4% of pay of those eligible employees making deferrals per year (about two-thirds to three-quarters of eligible employees defer into the plan). Rate of return Department of Labor data indicate ESOPs had a 9.1%…

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The Uses of ESOPs

March 31, 2020

Many people do not know what an ESOP is, let alone what one is used for, and the ways ESOPs can benefit employees. The following is summary of how ESOPs are used. To buy the shares of a departing owner: Owners of privately held companies can use an ESOP to create a ready market for…

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ESOP Infographic

March 25, 2020

Infographic by National Center for Employee Ownership (NCEO) from What Is an ESOP?

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Is the Trustee the Same as the Fiduciary of an Employee Ownership Plan?

March 18, 2020

In most cases, the trustee is the fiduciary, but the two functions are not necessarily the same. Plans must designate who the fiduciary is; they can designate this for all issues or have different fiduciaries for particular issues. A fiduciary is anyone who makes decisions about plan operations, including its management or the disposition of…

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DISCLAIMER: The Articles displayed on this website do not constitute legal advice, nor do they substitute for the advice of qualified professionals. While the Articles displayed on this website are designed to provide information regarding the subject matter covered, we cannot guarantee the accuracy of any statements contained therein. If any legal advice or expert assistance is required, the services of qualified professionals should be sought.

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