Employee Stock Ownership Plan (ESOP)

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Have you considered an Employee Stock Ownership Plan (ESOP) for your business? An ESOP is a special kind of retirement plan, one that can borrow money to buy company stock. Setting up an ESOP provides 3 key benefits to your business.

Benefit #1: An Exit Strategy You Can Live With

Making the decision to exit the company you worked so hard to build is a tough move. Selling to an outsider or a competitor could mean the end of your legacy and an uncertain future for your employees. If your employees don’t have the money to buy the business from you an ESOP can provide another option, giving you the opportunity to sell your shares to the ESOP. The Company itself will buy them, which means that you can walk away with a clean conscience and your business will be able to continue in its present form under the leadership of your board of directors.

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Benefit #2: Boost Employee Morale and Loyalty

Employee “owners” are more likely to stay engaged in the process of making your business a success. An ESOP doesn’t give employees direct stock ownership, but it doesn’t matter. An ESOP ties the success of an employee’s retirement plan directly to the success of the company, giving employees more motivation to work harder out of enlightened self-interest. This reduces turnover, reduces absenteeism and increases performance.

Benefit #3: Stop Paying Taxes on Profits!

Perhaps the most exciting benefit of an ESOP is the fact that it can allow you to stop paying taxes on your profits. An ESOP is a tax-exempt retirement plan, so taxes are paid only when employees take a distribution from the plan. The employees then pay regular income taxes on their distributions. You get more money to grow your business.

Is an ESOP Right for Your Company?

In spite of all of these benefits ESOPs do not make sense for every company. For example, your company must be a corporation to take advantage of ESOPs. In addition, there are other concerns such as how profitable your company is, how big your company is, and more. That’s why this decision should only be made with the help of a qualified attorney. The attorneys of BGS are ready to help.



W. James Vogl, Jr. has advised companies on employee benefits law for 30 years, and can assist you with all issues surrounding ESOPs. If you would like help in designing, implementing, and maintaining an ESOP then call BGS today at (763) 780-8500 or e-mail Jim at jvogl@bgs.com.

James H. Wills was one of the founding partners of the former law firm of Kalina, Wills, Gisvold & Clark, P.L.L.P. For over forty years he has practiced extensively in the areas of transportation, taxation, corporate law, employee stock ownership plans and insurance law. Prior to founding KWGC, Jim worked in the management and as general counsel for two major trucking companies. Jim practices out of our Pequot Lakes offices and can be reached at (218) 568-5868 or jwills@bgs.com.


Nicole R. Wiebold is an associate attorney in our Corporate, Transportation Law, and ESOP departments. She has been working closely with James H. Wills and Jim Vogl and can assist you with your ESOP today.