Selling to an ESOP Provides a Business Owner with Liquidity and Diversification

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As you may know from your financial planning and estate planning efforts, business owners can build a significant amount of wealth in the company they have invested their life creating and growing.  Unfortunately this value is accumulated in an otherwise illiquid asset, preventing a business owner from enjoying the fruits of his or her labor.  There is also the risk of having a large portion of wealth tied up in a single concentrated stock position. 

Selling all or part of the company to an employee stock ownership plan (ESOP) provides a business owner with both liquidity and diversification.  This option provides immediate access (Selling to an ESOP Enables a Business Owner to Sell In 60-90 Days) to all or a portion of a business owner’s personal wealth that is currently tied up in their illiquid business.  It also reduces the investment risk of having all of their wealth in one closely held investment and enables the business owner to build a more diversified portfolio.  If desired, all of this can be accomplished while retaining control of the company.

* If all or a part of the transaction is seller financed, the rate of return on the seller note can help further expand the diversification of their portfolio and further reduce their investment risk.  In today's environment we have seen seller notes with rates of return of 6% - 7% or higher, which can provide a very favorable fixed rate of return in uncertain economic times.

Our series on Selling to an ESOP explores many of the benefits of selling to an ESOP:

• Selling to an ESOP in 2012 Increases After-Tax Proceeds by 43%

• Selling to an ESOP Pays for Itself

• Selling to an ESOP Provides a 15%+ Expected Rate of Return

• Selling to an ESOP Provides Full Payment at Fair Market Value

• Selling to an ESOP Provides Additional Value for the Seller

• Selling to an ESOP Increases Cash Flow by Eliminating Income Taxes

• Selling to an ESOP Enables a Business Owner to Defer/Avoid Taxation

• Selling to an ESOP Enables a Business Owner to Sell In 60-90 Days

• Selling to an ESOP Creates an Internal Market and Built-In Buyer

• Selling to an ESOP Enables a Business Owner to Sell While Retaining Control of the Company

• Selling to an ESOP Provides a Business Owner with Liquidity and Diversification

• Selling to an ESOP Provides Greater Employment Stability and Increases Job Satisfaction

• Selling to an ESOP Saves Local Jobs and Strengthens the Local Community

• Selling to an ESOP Rewards Loyal Employees & Preserves Company Legacy