In the previous episode, Dave Phillips joined us to share his recent Employee Stock Ownership Plan (ESOP) experience. In today’s episode, we look at the technical side of the process – without getting too far into the weeds.
Joining us again on unsuitable is Tim McDaniel, a principal and director of valuation services here at Rea, who explains why ESOPs are growing in popularity, how they compare with other succession plan options, and what goes into implementation.
Succession Planning: Die at Your Desk, Or…
A popular succession plan (or lack thereof) for a surprising number of business owners is to simply die at their desk and let everybody else clean it up. It’s not the plan we would recommend or the best way to capitalize on your greatest asset… but it is an option.
However, you also have other, better options! You can sell it to an outside party, which maximizes your payout, but the downside is that your business loses its identity (and your employees can lose their jobs). While ESOPs may not have as large of a payout, it gives business owners the opportunity to preserve their legacy, and there are tax benefits to choosing a stock transaction over an assets transaction. It all comes down to what is more important to you: money or legacy?
If you are a business owner, you will be interested in these other topics discussed in this episode:
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