katzen marshall


Our valuation of Employee Stock Ownership Plans include:

  • Feasibility valuation studies
  • Transaction fairness opinions
  • Annual update valuations
  • Advising trustees in the sale of an ESOP owned company
  • Structuring and negotiating transactions for ESOPs

An ESOP is a Qualified Plan under the Employees Retirement Income Securities Act of 1974 (ERISA). ESOPs provide unique corporate finance and tax opportunities due primarily to two distinctive features as a retirement plan. First, an ESOP is required to invest primarily in the sponsoring company’s securities. Second, an ESOP can borrow funds backed by the credit of the sponsoring company in order to purchase shares.

Employee stock ownership plans allow owners of closely-held companies to transition ownership to employees in a tax efficient manner.  Potential tax benefits (assuming proper transaction structure and implementation) include:

  • Deferral of capital gains tax for the selling shareholders
  • Tax deductibility of principal and interest of the ESOP transaction note
  • No federal income tax on S-corporation stock owned by an ESOP

Other possible benefits of an employee stock ownership plan are:

  • Enhanced liquidity and diversification for the selling shareholders
  • Financial incentives for key employees
  • Facilitation of business succession and/or estate planning
  • Cost effective employee benefit