So, you’re facing a divorce – something you never thought you’d have to deal with. It seems you’re spending more time in meetings with lawyers than you are sleeping these days. It’s all so complicated. Trying to equally divide out community property and accumulated marital investments is incredibly difficult – especially when there is a privately-owned business involved comprising a large portion of the value of the community property.
What do you do when one spouse wants to remain at the helm of the business and the other wants to be cashed out of their share? Sometimes there just isn’t enough liquid capital for an off-the-cuff buyout. In that case, what’s the solution?
It can seem to be an unsolvable problem when the divorcing spouses cannot come to an equitable decision. Selling half of the business usually is not an option, but at the same time, you can’t take blood from a stone. You just don’t have the cash for a buyout that would allow a clean parting of the ways.
Is there a compromise that can work for both parties?
The answer, thankfully, is yes.
An Employee Stock Ownership Plan might be the perfect solution. There are definite benefits to considering an ESOP in spousal asset division. From a business perspective, choosing this option can provide significant bonuses for both parties. It is a flexible answer to a challenging problem.
To find out more about how an ESOP can help you with dividing your marital business assets equitably, check out our blog at http://www.bsllp.com/esops-can-provide-liquidity-to-facilitate-division-of-a-family-owned-business-upon-divorce.
Butterfield Schechter Receives Ranking in 2017 Edition of “Best Law Firms” by U.S. News
ESOPmarketplace.com is pleased to congratulate Butterfield Schechter LLP on receiving a San Diego Tier 1 ranking in the 2017 Edition of U.S. News – Best Lawyers “Best Law Firms” in the area of Employee Benefits (ERISA) Law practice.
The professional excellence of the firms listed is recognized by favorable ratings from both clients and peers. Butterfield Schechter has been included in “The Best Law Firms in America©” since 2015.
The “Best Law Firms” rankings – which indicate a combination of quality practice and legal expertise in firms ranked – feature the top firms as recognized by clients and peers for delivering professional excellence and high-quality ratings.
About Butterfield Schechter LLP
Butterfield Schechter LLP is San Diego County’s largest firm focusing its law practice primarily on employee benefit plan matters. Butterfield Schechter LLP was founded in 1998 by Robert K. Butterfield and Marc S. Schechter. The attorneys at Butterfield Schechter LLP are dedicated to providing top-quality legal service tailored to clients’ needs. With a broad-based clientele, including corporations, individuals, partnerships, limited liability companies, joint ventures, qualified retirement plans, nonprofit organizations, and government agencies. Our commitment to excellent service and our combined experience fosters positive and efficient solutions for clients. The firm’s persistent effort to prevent legal problems from occurring encourages the development of long-term client relationships. At Butterfield Schechter LLP, we take pride in offering comprehensive legal assistance in the areas of estate planning, employee benefits, tax and corporate law, and ERISA litigation.
For more information, visit www.bsllp.com.
ESOPmarketplace.com is pleased to congratulate Butterfield Schechter LLP partner Marc S. Schechter. He has been featured in the 2017 San Diego Super Lawyers list for a fifth year. This is a significant honor and a recognition of his consistent professionalism.
Mr. Schechter, who specializes in employee benefits, ERISA, and business matters, with special emphasis on ESOP transactions, is admitted to practice before the courts of California and New Jersey; the United States District Court for the Southern and Central Districts of California; the United States Tax Court; the Ninth Circuit of the United States Court of Appeals; and the United States Supreme Court. He is a member of the Employee Benefits-Taxation Section, State Bar of California; Taxation Section, San Diego County Bar Association; and a former member of the Legislative and Regulatory Advisory Committee, ESOP Association of America.
About Super Lawyers
Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The multi-phased selection process includes independent research, peer nominations and peer evaluations.
ESOPs (Employee Stock Ownership Plans) can benefit you, your employees, and your company. In fact, Congress has enacted a series of remarkable tax incentives designed to encourage employers to adopt ESOPs. Of course, ESOPs are not for everyone. Some business owners are not particularly concerned with the liquidity of their wealth or contemplating retirement and may prefer to maintain sole ownership of their company. And some businesses may not be appropriate for ESOPs — such as companies that are unprofitable or that have only a short-term industry outlook. But the benefits of ESOPs are by no means limited to large companies. Most small and medium-sized businesses are well suited for ESOPs. Following are ten important tax incentives relating to ESOPs:
- The company’s contributions to an ESOP are tax-deductible (within applicable limits) and tax-free to ESOP participants until they receive their distribution.
- The income of an ESOP trust fund is exempt from federal and California income tax (except to the extent Unrelated Business Income Tax shall apply to the trust).
- Special IRA “rollover” provisions and special tax treatment of appreciated company stock with ESOPs can defer the tax on distributions from ESOPs to employee-beneficiaries or, in certain circumstances, permit gains from distributions in the form of company stock to be taxed as long-term capital gains.
- You may sell stock of your closely held subchapter C corporation to an ESOP on a tax-deferred (potentially income tax-free basis), if (a) the ESOP owns at least 30 percent of your company’s stock immediately after the sale, and (b) you reinvest the sales proceeds in securities of other domestic operating corporations.
- Purchase of a company can be leveraged through use of ESOP borrowed funds to purchase the target company’s stock.
- If your company uses an ESOP to obtain a loan, the company is entitled to income tax deductions for both loan interest and principal payments – instead of on interest payments only (as in an ordinary corporate loan).
- Interest rates on loans to ESOPs sometimes are less than rates for other commercial loans.
- Cash dividends on shares held by an ESOP of a C corporation are deductible if passed along to ESOP participants — or if used to pay off a loan used to finance the purchase of company stock.
- Premiums for key-person insurance owned by the ESOP are fully deductible.
- Cashless deductions are available through the contribution of the company’s own stock to the ESOP, freeing up dollars for other company needs.
About the author: Marc Schechter specializes in employee benefits, ERISA, and business matters, with special emphasis on ESOP transactions. Mr. Schechter is admitted to practice before the courts of California and New Jersey; the United States District Court for the Southern and Central Districts of California; the United States Tax Court; the Ninth Circuit of the United States Court of Appeals; and the United States Supreme Court. He is a member of the Employee Benefits-Taxation Section, State Bar of California; Taxation Section, San Diego County Bar Association; and a former member of the Legislative and Regulatory Advisory Committee, ESOP Association of America.
BUTTERFIELD SCHECHTER LLP
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San Diego, CA 92131-1670
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