Are you a business owner considering an employee stock ownership plan (ESOP)?

Seligson & Giannattasio can help. We are independent consultants providing expert advice about ESOPs and alternatives.

What Is an ESOP?

An ESOP is a retirement plan that allows employees to indirectly own stock in the company.  Employees sell their shares when they leave the company to work elsewhere, become disabled, retire, or pass away.

When setting up ESOPs, businesses must adhere to the federal pension laws put forth under the Employee Retirement Income Security Act (ERISA).

ESOPs are touted for three reasons:

  1. Research shows a correlation between employee ownership and a company's financial success
  2. Reward loyal employees and incentivize key members of the management team?
  3. They offer significant tax advantages for the selling shareholders and align the interests of the owners and employees.

Structure of an ESOP

When a company creates an ESOP, it is setting up a trust for tax-deductible retirement contributions for employees.

Full-time employees with a year or more of service are typically included in an ESOP, and part-time employees may also be eligible.

Employee accounts vest over time

Advantages of Selling to an ESOP

When business owners are considering selling their company, they have several options:

  • Sell the company to the next generation in their family
  • Sell the company to a strategic buyer
  • Sell the company to a private equity firm
  • Sell the company to an ESOP

Depending on the structure, the company might be able to become a tax free entity and the selling shareholders might be able to defer/eliminate capital gains tax on proceeds received from the sale. The increased free cash flow at the corporate level will enable the selling shareholder to receive his/her proceeds from the sale in an expedited fashion. An ESOP is also a great way for the selling shareholders to create a personal liquidity event which often makes sense from a diversification of wealth standpoint.

Additionally, avoiding an outside buyer or equity firm and thus preserving the identity of the company they worked hard to build is appealing to many owners.

“When I was looking into ESOPs for my business, I needed unbiased advice. Seligson & Giannattasio was able to guide me through the alternatives to the best solution for my company.” - Rob Hodes, Cost Containment Group, Inc.,

Seligson & Giannattasio - Your Independent Consultants

An ESOP is a smart choice for many business owners, but the issues can be complicated.

In complex business matters, it pays to have an expert on your side. Seligson & Giannattasio have been helping companies succeed for over 90 years. As independent consultants, we are able to guide you through the ESOP process in a way that most benefits you.

Email Donald Giannattasio today at or complete the contact form

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Please call us today at (914) 428-5560. We'll be happy to offer you a free initial consultation. Thanks for visiting!

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