Employee Stock Ownership
Plan (ESOP) Consulting
Effective ESOP Transaction Advisory and Compliance
Companies become an ESOP (Employee Stock Ownership Plan) for a number of compelling financial, cultural, and strategic advantages.
Whether it is due to a business’s ownership succession or as part of an acquisition strategy or other reasons, ESOPs are a sophisticated tool for providing liquidity to selling shareholders while maintaining the company’s operational continuity and legacy. Beyond ownership transition, ESOPs also help enhance employee engagement through shared ownership while realizing significant tax advantages.
A strong consideration for implementing an ESOP, enhanced employee engagement and productivity, by granting employees a direct ownership stake, the plan fosters a culture of shared responsibility and aligns individual interests with the company’s overall performance. This often leads to increased motivation and improved operational efficiencies, ultimately contributing to enhanced profitability and long-term sustainability. And, in a time of challenging labor markets and highly competitive recruiting and retention tactics, ESOPs help employees stay.
Beyond the immediate transactional, financial, and cultural benefits, ESOPs can serve as a powerful mechanism for business continuity and succession planning. Brady Ware’s team helps you understand the transaction from all angles as well as helping execute the transaction. We also help position your ESOP for success, launching this structure effectively for Day One and on through its life cycle:
- Feasibility Analysis
- Transaction Structuring and Financial Due Diligence
- Tax Planning and Compliance
- Post-Transaction Accounting, Reporting and Guidance
Feasibility Analysis
We conduct a rigorous evaluation to determine if an ESOP aligns with your company’s financial structure, ownership goals, and employee demographics. This involves analyzing financial statements, projecting future performance, and assessing the potential impact on cash flow and profitability.
Our detailed feasibility study provides a clear understanding of the benefits, costs, and potential challenges associated with establishing an ESOP, enabling informed decision-making before significant investment.
Transaction Structuring and Financial Due Diligence
Our expertise ensures the ESOP transaction is structured optimally for all stakeholders. We perform comprehensive financial due diligence, analyzing historical data and future projections to assess the financial viability of the transaction and identify potential risks.
We also ensure to collaborate with legal counsel and valuation experts to develop a tailored ESOP structure that maximizes tax benefits and aligns with your specific circumstances, ensuring a sound financial foundation and transition for the ESOP.
Tax Planning and Compliance
Navigating the complex tax implications of an ESOP is critical. We provide expert tax planning to optimize deductions for the company and potentially defer or eliminate capital gains taxes for selling shareholders.
Our services extend to ensuring ongoing compliance with all relevant IRS regulations and reporting requirements, minimizing potential tax liabilities and ensuring the ESOP operates within legal frameworks.
Post-Transaction Accounting, Reporting and Guidance
The transition doesn’t end at closing. We provide ongoing guidance for the unique accounting and administrative requirements of an ESOP. This includes setting up appropriate accounting systems, understanding ESOP-specific transactions, and assisting with annual reporting and compliance.
Our support ensures the long-term financial health and smooth operation of the ESOP, allowing you to focus on your core business while maintaining compliance. And, this attention to your ESOP starts with appropriate attention in the early stages of the ESOP and as needed in ensuing years.
Key ESOP Advantages
In a transaction, because most ESOPs are structured as S-Corporations, which are not subject to federal or state taxes, owners will receive significant tax benefits. This can aid in paying the seller more quickly.
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As part of an owner’s succession plan, an ESOP can be structured so that you can start the transition process while maintaining a controlling interest in the company. Ownership, key management personnel and employees often appreciate this longer timeline affords.
Current employees gain a significant stake in a company’s ongoing success when the ESOP is launched: they become owners. Advantages include potential wealth creation, retirement savings and security, increased engagement and decision making as well as satisfaction in the company.
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Structured properly, ESOPs create a government-sanctioned retirement plan for employees while providing significant retirement assets to the selling owners.
5900+
There are more than 5900+ private companies operating as an ESOP in the U.S.
Data from the National Center for Employee Ownership.
264
The average number of companies that change to an ESOP per year is 264.
2.6M
There are more than 2.6 million active participants in private companies ESOPs in the U.S.
Comprehensive Guide to Business Valuations
Having a defensible and objective valuation of your business when preparing for an ESOP transaction is critical. Not only does Brady Ware’s valuation team provide an accurate assessment of your business’s value and worth, we also help provide insights into your business’s financial health and value drivers in a dynamic and competitive market that help well after the transaction is executed.
Act Now! TCJA tax provisions expiring after 2025 will impact your estate planning.
The clock is ticking! The estate tax exemption is set to expire in 2025, potentially impacting your ability to pass on significant wealth to your heirs. Don’t miss out on this opportunity to protect your legacy and minimize taxes.
Markets We Serve
Explore the industries we serve for entrepreneurial and lower middle-market companies nationwide.
Key Contacts
Samuel J. Agresti, CPA
Shareholder
sagrest@bradyware.com
Randy K. Domigan, CPA, CFE
Shareholder
rdomigan@bradyware.com
Todd R. Roberts, CPA
Shareholder
troberts@bradyware.com
