ESOP Logic: How to Cash Out Tax-Free and Still Keep Your Business — A Practical Guide for Business Owners and Their Advisors

This White Paper will briefly explain how ESOPs work and will illustrate how to use an ESOP to solve some problems faced by virtually all private companies and their owners. First, we’ll explain the legal mechanics involved in creating and operating an ESOP. Next, we will describe in detail the special tax incentives available to you when your company adopts an ESOP. Then, we’ll outline the various purposes that an ESOP can serve. Finally, we will describe real-life examples to show how ESOPs solve common business and estate-planning problems.

These examples will demonstrate how you can use an ESOP either to facilitate a transition in the ownership and management of your closely held corporation or to diversify your personal wealth on a taxfree basis while maintaining control of your company. Specifically, the White Paper outlines the following topics:

• How ESOPs Work
• General Discription of an ESOP
• Special Provisions Applicable to ESOPs
• The Tax-Free Rollover
• Leveraged ESOPs
• Dividends-Paid Deduction
• ESOPs for S Corporations
• Potential Problems and Pitfalls
• Conclusion- Putting it All Together

For the full story, please view the PDF.