Employee Stock Ownership Plans
employee stock ownership plan (ESOP).
A succession plan that can benefit business owners—and employees.
For many business owners, an ESOP may be the best solution for developing a succession plan, while generating potential tax advantages and providing employees with the incentive to coalesce into a strong management team.
How an ESOP Works
With an ESOP, a company creates a trust for the employees and allocates shares to eligible employees’ accounts, which are subject to vesting requirements. Normally, ESOP participants receive the stock, or cash equal in value to the stock, after they leave the company or upon retirement.
When an ESOP borrows money to buy company shares, it is called a leveraged ESOP. The ESOP may own any percentage of the company’s shares, and shares may come from the company and/or the selling shareholders.
Why consider an ESOP?
- Establishment of a succession plan
- Potential tax benefits
- Diversification of net worth
- Increased liquidity
- Employee compensation
At Fifth Third, we provide expertise and flexibility in constructing ESOP solutions, which include:
- Leveraged ESOP
- Non-leveraged ESOP
- Full and partial sale
- Second stage transactions
- Seller note refinance
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