When to Choose an ESOP Succession Plan Over a Conventional Exit Strategy
Employee stock ownership plans (ESOPs) offer a number of advantages to sellers, companies and employees. ESOPs are a flexible tool for corporate and shareholder succession and offer benefits no exit strategy can match. However, those unique advantages are only worthwhile for those who find the very nature of ESOPs worthwhile. On the other hand, pure exit strategies (such as strategic third-party or private equity transactions) have advantages that ESOPs can’t promise. But they also come with their own costs and complexities. Neither side is perfect for every situation and both need to be evaluated carefully.
How Much Revenue Must A Company Have To Be Big Enough For An ESOP?
We look at three measures of revenue for ESOP suitability purposes:
Employee Benefits Law Group PC Earns Recognition
Kevin Long Named Among Best Lawyers in America
Employee Benefits Law Group PC, California’s preeminent benefits law firm, is pleased to announce that The Best Lawyers in America has again honored the firm by naming Kevin Long to its list. He has earned the recognition every year since 2001.
Dividends Versus Distributions In ESOP Planning | Abstract
C corporations issue dividends. S corporations issue distributions. What's the difference? In ESOP planning, you might find that S corporation distributions mean the difference between being able to finance an ESOP transaction or not. In a C corporation, you can use dividends to avoid double taxation on at least part of the company's income. This article is an in-depth review of the uses, and limits, on dividends and distributions in an ESOP company.
The U.S. Department Of Labor And Certain Recurring ESOP Violations: If They've Seen It Once, They've Seen It … A Lot! | Abstract
A few common ERISA violations come up repeatedly in DOL investigations of ESOPs – typically related to the ESOP transaction. In this brief article, you'll learn what those common errors are and how you can avoid or correct them.
ESOP Refinancing: Fiduciary Duties | Abstract
At some points in the life of the ESOP loan, you may find it advantageous or necessary to refinance that debt. This article examines the factors fiduciaries should consider, including the benefit of the refinance to the company versus the benefit to the ESOP participants; the impact on current participants versus future participants; and whether the ESOP should be compensated for agreeing to the refinance.
ESOP Diversification Myths and Misunderstandings | Abstract
Diversification – that often misunderstood process by which "qualified participants" can elect to have some of the shares in their ESOP account distributed to them in cash or rolled over to other investment options. Read this article for a basic overview of which participants have diversification rights, the choices available to participants, and the timing of the diversification notice, election and execution.
ESOP Refinancing: Fiduciary Duties
ESOP transactions using loans to purchase stock are complex, typically well thought out at the outset, based on the negotiated terms of the deal, the company's finances, the demographics of the ESOP participant census and the projections of repurchase liability. However, because any of these variables can change over time, ESOP loans can be refinanced. But a refinancing, no matter what the reason, must be agreed to between the ESOP trustee and the lenders and guarantors (if any) of the ESOP debt, which may include the selling shareholder, the company or a bank. This article identifies the seldom discussed yet appropriate factors under ERISA and trust law for fiduciaries to consider when refinancing an ESOP.
Professionals can 'Cash In' with Cash Balance Plans
This article explains the unique characteristics of a cash balance pension plan and its suitability for use by professional groups where the owner-professionals are already maxing out their contributions under a defined contribution plan.