Family-owned businesses, a key pillar in the American economy, make up a significant number of the privately held companies across our country. Although these companies cut across all industries and range in size from small to large, they all share common challenges. The most daunting of these challenges is how to manage the transition of the business from generation to generation. Keeping the core family values balanced with an ever-changing market place and often diverging goals amongst the family members is a challenge that many family businesses don’t survive. One intriguing solution to this challenge for many family-owned businesses is to bring the employees into the shareholder group through the sale of stock to an Employee Stock Ownership Plan (ESOP).
Our ESOP owned company has accumulated a substantial amount of cash from profits. We know it’s easy to let the excess cash build. But, how do we know when it makes more sense to use that cash to grow through reinvestment or acquisitions?
Change is hard to initiate even when we know the results will be better for us. This is true when there are signs that our ESOP valuation firm is no longer providing the necessary professional assistance. Our reluctance fades however, if warning signs begin pointing to increased risks for our company.
Succession Planning for Builders & Contractors
Listen as Will Stewart of PCE and Dean Mead ESOP attorney, Jay Van Heyde, discuss the key benefits of creating an ESOP for founders and owners in the construction industry.
Congress has chosen to bestow a variety of significant tax benefits on business owners and companies that participate in a special ownership structure. Because it is very difficult for a fully taxable ownership structure to compete with a tax-advantaged structure, many business owners should evaluate the possibilities under this special structure, known commonly as an Employee Stock Ownership Plan (ESOP). The ESOP structure provides shareholder and corporate tax benefits which require proper consideration and transaction structuring to ensure maximum benefit.
Transportation companies are thriving today. But the industry’s most coveted asset, its drivers, are being heavily courted in a competitive employment environment. For a majority of transportation companies, driver satisfaction goes hand in hand with company reputation, customer satisfaction and success. The American Trucking Associations (“ATA”) reports that the transportation industry has struggled with driver shortages over the past 15 years. The shortage further exacerbates profit margin as the recent tight labor market has given rise to increased wages for drivers.
Are you a business owner considering a partial or total ESOP (Employee Stock Ownership Plan)? If so, you are likely to find that the Tax Cuts and Jobs Act of 2017 will produce greater benefits for you and your company’s stakeholders than before the law was passed.
Late last year Congress passed the final version of the Tax Cuts and Jobs Act of 2017. Although the plan does not alter ESOP legislation, there are some indirect effects on ESOPs. Some of the changes will impact the valuations of ESOP-owned companies.