Exit Strategy Using an ESOP

December 15, 2019

At a glance

  • The main takeaway: Employee stock ownership plans (ESOPs) are unique and nontraditional vehicles to streamline the business succession and exit planning process.
  • Impact on your business: Below, we explain how Aprio helped one long-term client implement an ESOP and navigate the complex challenges that often come with exit planning.
  • Next steps: Contact Aprio’s Retirement Plan Services Team if you would like to explore more information about the ESOP and find out whether it makes sense for your business.

Schedule a consultation with Aprio today

The full story:

Recently, we wrote an article detailing how an employee stock ownership plan (ESOP) can be a beneficial succession and exit planning tool for business owners. Sometimes, business transitions take a somewhat nontraditional path, and the ESOP is certainly one of the paths less taken by owners. So, what inspired us to introduce the ESOP as a viable strategy to help facilitate a smooth transition?

ESOPs: Exploring the path less traveled

At Aprio, we work with several clients who have adopted ESOPs to streamline the exit process. But there is one long-term client, in particular, that comes to mind; we helped guide their business through the more difficult portions of adopting and administering an ESOP.

Generally speaking, it is unusual for business owners to decide to turn over their company to the employees, but that is exactly what our long-term client did. Once the owners made the decision to use an ESOP to transfer ownership, we recognized that there were some unique hurdles to clear. Aprio’s team deployed some fairly complex and sophisticated solutions to help the implementation process, including items related to planning, valuations, annual administration, census reports, cash flow and income tax effects, among others.

The process was made a little more complicated by the fact that the client’s business was operating as an S corporation. However, once the complex planning process was complete, we uncovered many tax benefits the client could potentially reap via the ESOP, as well as savings that more than offset the additional complexity.

This is why the ESOP is such an important vehicle for business owners to consider when planning their succession and exit strategies. Not only can the company reap potentially greater tax benefits and savings, but they can also improve employees’ morale and positivity, providing opportunities for them to actually invest in the company they work so hard for.

The bottom line

We strongly encourage you to click here and read our full summary of ESOPs as a succession and exit planning strategy. If you would like to explore ESOPs further and find out whether they make sense for your business, don’t hesitate to contact Aprio’s Retirement Plan Services Team. Schedule a consultation with us today.