If you own a closely held corporation and are approaching retirement age, employee stock ownership plans (ESOPs) may help you balance conflicting goals for your business.
The National Center for Employee Ownership currently estimates that there are about 7,000 Employee Stock Ownership Plans (ESOPs) covering about 14 million employees in the United States. Roughly two-thirds of companies offer ESOPs to provide a market for a departing owner’s interest in a closely held business. Others may serve as a supplemental employee benefit plan or a mechanism to borrow money under favorable tax rules.
It is common for departing owners to tap at least some of the value of their business to fund their retirement. However, business owners may also wish to preserve their company for their children, employees and community. Even if you’re aren’t ready to let go just yet, there can be tax advantages to transferring ownership sooner rather than later.