3 Benefits of ESOPs in Succession Planning
3 Benefits of ESOPs in Succession Planning (Video Transcript)
One of the many benefits of Employee Stock Ownership Plans, or ESOPs, is that they simplify succession planning for business owners seeking sustainability.
As Baby Boomers consider retirement, more businesses are choosing to sell to an ESOP rather than a private buyer. There are approximately 6,800 employee-owned companies in the United States, covering more than 14 million individuals, with about 250+ new ESOPs being formed annually.
The increasing popularity of ESOPs among business owners engaging in succession planning is mainly due to three benefits:
1. Potential financial advantages.
Selling to an ESOP can come with tax benefits for the seller, such as deferred or reduced capital gains taxes and income taxes.
2. Minimized turmoil for the company and its employees.
Selling to an ESOP allows the company to retain all of its employees, which is not always possible in mergers and acquisitions. This results in a smoother transition for employees and the business as a whole.
3. More control over the business owner’s legacy.
Especially for businesses in small communities, selling to an ESOP is also a strategy founders may use to ensure employees are taken care of and their legacy remains intact even after they leave the company.
Is an ESOP right for your company? The experts on Bankers Trust’s ESOP Finance team can help at each step along your succession planning journey.
Learn more about ESOP Finance at Education.BankersTrust.com.