So, you’ve been giving a lot of thought to your business succession plan, and you’ve put many hours and sometimes sleepless nights into the research process. There are a lot of options to consider, and you’re starting to formulate a strategy that feels right to you.
It takes a long time to wade through the various scenarios that might be best suited to your personal business situation. Unfortunately, retirement planning takes just that—a ton of planning! But you’re off to a great start—you know that an ESOP is a right fit for you.
ESOPs provide a wonderful way for a CEO to transition from a very active role to a more passive one. Employees opting into an ESOP gain a real feeling of ownership, pride, and teamwork. It’s a win-win situation for all involved.
Seeing the benefits to all parties involved was easy for you. But trying to actually implement ESOPs into your business? Not so much.
It’s easy to become overwhelmed by what appears to be an insurmountable task. The sheer amount of logistical paperwork seems like a nightmare! But like anything worth tackling, it becomes less intimidating when broken down into simple, manageable steps.
In this article, you will discover five straightforward steps to take your ESOP from just a concept to a reality.
Business succession planning is a hot topic amongst enterprise owners today. You spent a lifetime building a company and took great care to make it the success that it is. You want to take the same amount of care in planning its transition from you at the helm to your chosen successor/s taking full control.
You’ve done your homework—you know what options are available to you. You know you don’t want to sell the business, and you also don’t want to close it.
And you’ve taken care to choose someone you really feel just “gets” your business and can take it into the future.
One of the options you’re strongly considering is an Employee Stock Ownership Plan or ESOP. But… you’re not entirely certain how it works or even if it’s the right plan for you.
You have a lot of questions. Will this type of plan be attractive to my employees? Will I have to give up too much control too soon? Would it be fiscally wiser for me to consider an outright sale to a third party? How much of my company’s confidential financial records do I have to expose to shareholders?
These are good questions. A wise company owner considers every angle before making such an important decision.
Check out our blog at http://www.gbhcpas.com/blog/esops-debunking-the-top-5-misconceptions to discover the five most common misconceptions about ESOPs.
You’ve spent your life building your business. You wear your successes and life lessons on your sleeve with pride. Yet with each ticking of the clock, you realize that time is passing by and that you must prepare for a future where you take on a different role in regard to your company as you pass the reins to your successor.
Where to start? That’s the big question! The idea of trying to prepare to leave something that you’ve invested so much into is tough to wrap your mind around. Breaking it down into manageable steps can seem overwhelming.
The truth is there is that there is no cookie cutter answer. Every business must prepare for its founder(s) to move away from an active role and for new leadership to step in. But what this looks like for each company will be as unique as the products and services each offers.
In seeking the right exit strategy for you, there are many options to consider. Some are better suited to your company’s specific needs than others. Here you will find a list of four directions forward for your business on the road to a successful transition as you prepare for your retirement years. Read more at: http://www.gbhcpas.com/blog/4-valuable-strategies-for-business-succession-planning
As much as you love your businesses, you must admit that retirement is an attractive idea. You dream of relaxed mornings sipping coffee by a roaring fire or leisurely reading the newspaper on a sunny day with nothing calling us to abandon your leisure and get to work.
It can happen. For many of us, it will happen soon. But before we can fade into the glorious sunset of retirement, we have a job to get done.
We have to deal with the next step – what to do with the business.
Maybe you can’t yet imagine your business without you at the helm. It’s definitely hard to do. You’ve invested your life in the development of this entity. But whether you have five years or fifteen years before retirement, it’s important to start putting processes in place to ease the transition from a corporation you are 100% hands on with to a business that will become the responsibility of your successors going forward.
You need to start developing your exit plan.
No two businesses are exactly the same, and the design of your exit strategy will be as unique as the service that you provide. Here are four simple business succession concepts to consider in preparing your retirement plan.
Read more at http://www.gbhcpas.com/blog/4-valuable-strategies-for-business-succession-planning
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.
Successful leaders know that effective communications are a competitive advantage. As you begin 2017, make a resolution to evaluate the health of your employee communications. Are business goals and actions aligned? Do employees understand priorities and do they have a way to participate and share ideas?
Everyone talks about the importance of communications, but it’s just lip service without an actionable plan. Here are four ways to achieve better communications in your ESOP in 2017.
1) Map out your communications calendar right now—Begin with a “Welcome to 2017” message. Schedule dates for the entire year now to ensure it remains a priority. Keep the content fresh with a mix of performance results, customer and employee stories, and encouragement. We all need more of that.
2) Articulate the vision— If a customer asks an employee what your business was about, what would they say? Everyone on your team should use the same headline. When people can connect their work to big goals, they are more engaged. Leaders who communicate the vision and values, then put those values into action, see performance climb.
3) Use stories to make an impact—Think back to the most recent story that struck a chord with you. Was it complicated or overstuffed with facts? Simple stories make an emotional connection with the audience and hold their attention. Use your own experiences to make a point. Leaders who share a little of themselves in communications are viewed as credible and human.
4) Get visual—Visuals are processed 60,000 times faster than text. If you rely on email as your primary form of communication, there is a better way. In 2016, there were 4.6 billion cell phone users in the world and most phones have video or photo capability. Your team members are viewing or creating visual media every day. Use photos and video as frequently as you use memos. Video is an excellent way to improve message retention, connect with remote workers, and engage senior leadership with teams. The best part is you don’t have to have a large budget or be an on-camera pro. If you’re sincere, it will be memorable.
Odell Brewing is, for the first time, offering beers from other ESOP-owned craft breweries, as a show of ESOP solidarity.
Read the rest of the post at: http://www.dewittross.com/news-education/posts/2016/10/05/what-s-brewing-with-esops-now
Grand Rapids-based Crystal Flash, Inc,. announced recently that its ownership group had decided to sell to an ESOP rather than to a 3rd party or other group.
Read full post at: http://www.dewittross.com/news-education/posts/2016/10/31/mi-based-crystal-flash-inc.-opts-for-esop
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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