Valuation of ESOPs

Employee Stock Ownership Plans (ESOPs) are often an extremely effective method of selling your ownership in a business. As an owner, selling your stock to your employees through an ESOP allows you to defer capital gains tax and avoid the need to find a buyer and pay high commissions on the transaction.

There are multiple ways to structure an ESOP. The greatest tax savings are derived when the ESOP purchases the stock financed with debt. The company then makes distributions to the ESOP so that it can repay the debt. Both the interest and principal payments on the ESOP loan are tax-deductible and the owner/seller can defer capital gains taxes on the sale of the stock as long as the proceeds from the sale are reinvested in qualified other investments.

Sack Associates performs valuations for the establishment and maintenance of ESOPs.