Employee Stock Ownership Plan

First let’s define a ESOP (Employee Stock Ownership Plan) as a qualified defined contribution plan that invest in the stock of the company offering in the company’s retirement plan. This type of plan help employees prepare for retirement and are used by companies to plan for ownership succession.

The following are advantages of ESOP plans.

•  The ESOP does not change corporate governance
•  Companies of all sizes can benefit including 30 or less size companies
•  Allows owners to decide how much of the business to sell
•  Transaction costs are similar to the costs of selling to a family member or outside party
•  Other than annual statement there are no other financial disclosures required
•  The ESOP plan is easy to understand as the plan’s assets are of company stock

Overall ESOPs offer business owners a flexible approach to diversifying their portfolio, helping employees with their retirement goals and planning for business successions.

Daniel Iuculano, AAMS CMFC

Financial & Wealth Planner