While Employee Stock Ownership Plans (ESOP) can be complex, they also have a number of benefits and implications—they can be a tool for succession planning, motivate or reward employees and more.
Whether it is communication with employees, coordination of the service providers involved, help with the employee stock ownership plan (ESOP) or managing the repurchase liability, it's important to understand the accounting and tax requirements that accompany this unique ownership structure.
How Does an ESOP Work?
An ESOP is a type of retirement plan that invests primarily in company stock and hold assets as a trust for employees. A company that is employee-owned will have an ESOP. These types of plans are particularly popular in family-owned businesses and profitable organizations.
ESOPs exist in all types of industries and come in all shapes and sizes. In fact, there are approximately 6,500 companies in the United States with ESOPs.
ESOPs are a great alternative to selling to a private equity firm or strategic competitor. Participants are beneficiaries of the stock, and the ownership and management teams continue to run the day-to-day of the business. When it comes time to sell, an ESOP allows employees to benefit from the sale of a business.
"What an awesome opportunity to prepare the company for the next 50 years with the employees as owners as we crossed the threshold on June 1, 2022. We couldn't have done that without Eide Bailly."
JEFF ECKROTH, CEO Eckroth Music
Why You Need to Use a Trusted ESOP Advisor
If your company is currently operating as an ESOP or thinking about becoming one, a knowledgeable business advisor who understands the nature of employee-owned companies is a must.
Eide Bailly not only understands the nature of ESOPs but also has 25 plus years of experience serving them. We currently work alongside employee-owned companies ranging from small to Fortune 500 companies.
Our services include:
- ESOP audits
- Consulting on ESOP accounting
- Entity and transaction structuring
- ESOP feasibility studies and more
We're here to help your employee-owned company succeed, with knowledgeable staff who understand the complexities you face.