Employee Stock Ownership Plan (ESOP)

How it Works

Stock is acquired by purchasing it directly from the company or from its stockholders. The stock, cash or other investments are allocated to the employee's accounts in proportion to their compensation and held in trust. Distributions are determined by the employee and plan administrator and distributed to them or their beneficiaries at retirement, termination of employment, disability or death.

Advantages

• Provides a friendly buyer for the stock.
• Owner retains control of the business.
• Employees participate in the growth of the business.
• Owner can defer the tax on capital gain realized when shares are sold to the ESOP if proceeds are reinvested in qualified replacement property within a replacement period.*

*The replacement period begins three months before the sale and ends 12 months after the sale.