Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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877-508-0433Good People Deserve Good Lawyers. ®

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How ESOPs can help family owned businesses

Business owners of Nevada might be surprised to learn that even though family-owned businesses are responsible for hiring about 60 percent of the American working population, about 70 percent of these same businesses don’t make it past a single generation. Consequently, family-owned businesses are very wary when it comes to succession planning, especially if their owners are anxious about the business lasting for more than a generation in the family.

Fortunately, business owners can use an employee stock ownership plan, also called an ESOP, which is something that has proven very useful for people worried about business formation and planning. An ESOP is a tool that can help transition the company from one owner to another in an internal, tax-advantaged way while causing minimal disruption to the current company culture. Ergo, ESOPs are a viable tool for selling a business that almost every business owner should consider. Furthermore, seeing as ESOPs offer the new buyers certain tax advantages, ESOPs can be used to sell companies in a much more tax-efficient manner.

What’s more, any type of company can use ESOPs; there are no restrictions whatsoever, which is good news for businesses that aren’t usually courted by third-party buyers or ones that want to refrain from upsetting their corporate culture. For example, in the construction industry, there are millions of mid-sized companies in the US that don’t have a lot of interested third-party buyers and can benefit from using ESOPs. Alternatively, engineering firms also benefit from using ESOPs, which makes sense given that an engineering firm’s strongest assets are its employees and the firm wants to maintain the culture to the best of its ability.

An ESOP is a powerful tool that has proven itself to be useful. Nevertheless, there are still multiple nuances related to its use. Therefore, business owners considering this method of ownership transference might benefit from reaching out to an experienced attorney.

John P. Aldrich
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