Four Reasons Why a Shareholder of a Private Company Should Consider an ESOP as a Partial or Complete Exit Strategy
- Any Portion. The Shareholder can sell any portion of the Company he wants with no third party dictating the percentage he sells. No. 3 below requires the ESOP to own at least 30% after closing.
- Fair Market Value. The Shareholder will get fair market value for whatever interest he decides to sell. This typically means 20% or more in excess of a private equity buyer and within 10% of a strategic buyer.
- Capital Gains Deferral. If the Shareholder properly and timely elects and it is properly structured, he can defer his capital gains taxes, possibly permanently.
- Pre-Tax Financing. The funds borrowed from the bank and/or seller are repaid by the Company on a pre-tax basis. (i.e. the interest and principal of the loan are both deductible).
Contact us to schedule a meeting to discuss the ESOP Benefits as they relate to your business.