Could an ESOP Be Right For Your Company?

Recently, we’ve talked a lot about succession planning.

After all, a recent study of small businesses by U.S. Bank showed more than half of small business owners are less than 10 years from retiring.

Most business owners want to transfer their business to their children, but many are looking for alternatives to keeping the business in the family.

This is not an easy process. After all, only 30 percent of small businesses survive after the founder leaves the business.

One of the more interesting ways to continue a company’s success is through an Employee Stock Option Plan.

If a business is profitable and has a group of long-term employees, providing an option for the employees to take over without buying shares, and ESOP may be a good option.

The attorneys at The Orlando Law Group specialize in helping businesses structure their succession planning in Orlando, Sanford, Winter Garden and Kissimmee and are here to help set up the tools and programs that can keep your company running for generations.

What is an ESOP?

An ESOP creates shares in the ownership of the company that are owned by its employees.

To start with, a trust is created and takes on debt—usually a loan—to pay the founder for the business.

After that transaction, shares of the company are created and distributed to employees, generally based on a formula that includes items such as seniority, salary and more.

The debt is repaid by the new company, and any profits are then distributed to employees who have shares in the company.

An ESOP is a complicated transaction, so it is important to work with an experienced attorney to ensure it is done correctly and with protections for everyone involved.

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