An Employee Stock Ownership Plan (ESOP) is a type of employee contribution program in which a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares for employees.
The decision to implement an ESOP involves careful consideration of numerous complex financial, valuation, legal, tax and human resource issues.
Employers often find themselves asking these questions:
- What considerations are unique in valuing the company for an ESOP versus a sale to a third party?
- Will the company’s qualified payroll be adequate to support the required contributions?
- What are the tax implications to the selling owner and to the company?
- How will the company’s corporate structure (C corporation or S corporation) impact the transaction?
At Evergreen Advisors, we understand that a well-documented, independent, unbiased valuation of an ESOP company’s stock is a critical part of the process. ESOP transactions are regulated by the Department of Labor (DOL), and the typically have significant tax implications. Therefore, an ESOP valuation must be able to withstand potential challenges from multiple parties including the DOL, the IRS and the company’s employees.
Our services associated with Employee Stock Ownership Plans include, but are not limited to:
- Valuation for Initial Sale
- Valuations for Annual Contributions
- Fairness Opinions for ESOP Transactions
