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ESOP vs 401k for Retirement Security

April 18, 2022

ESOPs and 401ks can be valuable retirement security account options—both for employers and their teams. However, it can be tough to decide which account is best for your organization’s needs. So, let’s look at some of the differences between these two retirement vehicles so that you can decide which program best for your organization.  …

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ESOP vs. 401k: An Introduction

February 10, 2022

Ever since the establishment of the first ESOP in 1956, employee ownership has become a valuable tool for attracting and retaining top-tier talent that is loyal and vested in the success of the companies that hire them. In fact, many companies offer ESOPs in conjunction with a secondary retirement plan, such as a 401k. Offering retirement benefits such…

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Limited Liability Companies (LLCs) and Employee Ownership

November 11, 2020

Limited liability companies (LLCs) are a relatively recent form of business organization, but one that has become increasingly popular because of their simplicity and flexibility. In contrast with corporations, which have shareholders, the owners of LLCs are called members, and the unit of ownership is not stock but “membership interests.” The maximum number of members…

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ESOPs in the U.S.

July 15, 2020

Infographic by National Center for Employee Ownership (NCEO) from ESOPs in the U.S.

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A Comprehensive Re-evaluation Needed to Better Promote Future Retirement Security

July 8, 2020

What GAO Found Fundamental changes over the past 40 years have led to various risks and challenges for the three main pillars of the U.S. retirement system. For example, current projections indicate that by 2034, the Old-Age and Survivors trust fund for Social Security’s retirement program—the first pillar—will only be sufficient to pay 77 percent…

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Can a 100% ESOP company borrow money through the plan to buy other assets?

July 1, 2020

It can, but given that virtually all 100% ESOPs are S corporations and pay no tax, there is no tax benefit to doing so. This may be a way, however, to get shares to new employees. Say a company wants to borrow money to buy a building (or any other asset). Shares would be allocated…

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ESOPs in LLCs, Partnerships, PEOs, Professional Corporations, and Subsidiaries

June 24, 2020

Can a leasing company (also called a Professional Employer Organization, or PEO) have an ESOP for its employees? A PEO employee working for a client organization (CO), known as a “worksite employee”, is often considered a common-law employee of the CO, as is the case for a worksite employee works full time at the CO,…

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Does the ESOP Fiduciary have a Role with Respect to Normal Business Operations as Opposed to ERISA and Plan Document Issues?

June 10, 2020

The trustee is the shareholder of record for corporate law purposes. As a fiduciary for these shares (or as directed by the entity or person acting as fiduciary), the trustee has all the rights any other shareholder would. These rights vary from state to state as corporate law is a state law issue. They include…

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Trends in Corporate Restructurings and Implications for Employee Pensions

June 3, 2020

U.S. Government Accountability Office GAO-19-447R: Published: Jul 12, 2019. Publicly Released: Jul 12, 2019. What GAO Found Over the past 20 years, corporate restructurings, particularly mergers and acquisitions (M&A), tended to happen more frequently during periods of economic expansion. GAO’s analysis found that from 1999 through 2018, M&A activity comprised the largest share of corporate…

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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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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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