Join OneAmerica to learn how ESOPs can solve the business succession challenges your clients face. Statistics show that 55%–70% of closely held businesses in the US are approaching the need for succession planning. Combined with the aging of Baby Boomers, this creates a prime opportunity to utilize ESOPs to address business succession. This expectation is also supported by some little-known changes affecting ESOPs in Secure 2.0. Learn all about ESOPs and how this tool can help you in your business!
Agenda:
- Business Succession – how to open the conversation with your client
- ESOP tax incentives
- ESOP ideal candidate profile and steps to the transaction
- Why we'll see more ESOPs created than ever before
- How ESOPs can positively influence your client relationships
Presenters |
Dawn Hafner |
Summary:
To help advisors become comfortable discussing Employee Stock Ownership Plans (ESOPs) with plan sponsors, it's essential to understand how ESOPs function and their benefits. ESOPs are qualified plans designed to invest primarily in the employer's stock, with the employer funding contributions. They create a market for the stock, serve as a business succession tool, and can borrow funds to purchase stock from selling shareholders. ESOP ownership levels can vary, offering many tax advantages.
Key reasons to consider an ESOP include significant tax benefits for sellers, companies, and participants; the ability to maintain control while developing future management teams; and positive impacts on company culture and performance. Dawn effectively illustrated these tax benefits using case studies of S and C corporations.
A growing interest in ESOPs is driven by the retirement of baby boomer business owners, who own half of all privately held firms in the US, making many companies potential ESOP candidates. Additionally, the SECURE 2.0 Act and new DOL initiatives provide funding and resources to educate employers about the advantages of employee ownership and succession planning.
ESOPs can integrate with other planning tools such as nonqualified plans and 401(k)s, offering a flexible timetable for shareholder exits, significant tax savings for company growth and acquisitions, and increased potential for employee wealth and enhanced company culture.
Ideal ESOP candidates include S or C corporations with consistent earnings and cash flow, interest in full or partial sales, at least 20 employees, strong management teams, openness to employee ownership, and EBITDA of at least $1 million.
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