Employee stock ownership plan

The right employee retirement plan can be a win-win situation for employees and business owners.

Mazars in the US helps clients determine the best business strategy for long term success.

The advantages of employee stock ownership plans

An Employee Stock Ownership Plan (“ESOP”), can be an excellent tool to improve liquidity and ensure a stable succession. They offer employees an ownership interest in the company, allowing them to invest retirement savings primarily in the stock of the employer. And, as with other retirement savings, ESOP contributions are fully tax deductible and can increase cash flow because employers can make plan contributions in the form of stock.

Having a stake in the company offers employees greater incentive to support your business’s success in the long term. The funds raised by an ESOP can finance a range of items – from an ownership transition, to raising new equity capital, refinancing debt or acquiring new assets. They can also increase cash flow by making plan contributions in stock instead of cash. If the business is a Sub-S corporation, ESOP is not taxable on its share of corporate earnings – if wholly owned by an ESOP, that is all of its earnings.

However, as with other employee benefit plans, ESOPs must comply with applicable laws like ERISA, along with additional special requirements. This level of complexity can make it challenging for a business to determine if it is advantageous to put an ESOP in place and then set it up so that the plan is in compliance with all regulations

Our approach 

Our process starts by analyzing the needs of the owners to determine if the ESOP is the best strategy to move forward in planning. We explore any available alternatives with clients. including mezzanine financing, defined benefit plans, sale of the company, along with the ESOP to help our clients make the best choice for their situation. The Mazars team has helped various clients across industries from inception through maturity of their ESOP transactions.

Our services 

Ideal tax structure

  • We work with owners in coordinating ideal tax structures for maximizing the benefits of entering an ESOP transaction.

Qualified replacement property 

  • Mazars also assists owners in navigating the intricacies of qualified replacement property obtained once transaction is complete.

ESOP benefits

  • Increased cash flow and profitability
  • Improved employee productivity and motivation
  • Reduced turnover
  • Diversification of equity while retaining business control
  • Enhanced access to capital
  • Smooth succession and retirement for stockholders

Our insights

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