ESOP TRANSACTION ADVISORY
Maximize your success today and ensure significance for tomorrow
What is
an ESOP?
Employee Stock Ownership Plans (or ESOPs) provide a way for owners of privately held companies to create a succession plan by selling their shares to their employees via a newly created retirement plan. ESOPs were created by Congress to encourage owners to sell to their employees and both the sellers and their employees receive very significant tax breaks.
ESOP Financial Benefits
Many business owners are interested in ESOPs because of tax advantages are very significant for both the business owner and the company itself. We’re here to make sense of the major incentives and benefits available to you.
Internal Revenue Code Section 1042 was created to encourage business owners to sell their shares to their employees and it enables selling shareholders to defer, and in conjunction with their estate planning, to eliminate income taxes on the sale of their shares to an ESOP. 1042 increases a seller’s net receipts by approximately 1/3 over a taxable sale.
A 100% S-Corp ESOP is exempt from Federal and State Income Tax. This tax savings will significantly increase the cash available to pay the selling shareholders and will greatly enhance the Employees’ retirement benefits.
The Federal Estate Tax, commonly known as the “Death Tax,” is 40% on all assets greater than a permitted exemption. Sellers who sell to ESOPs have unique estate planning opportunities that can be used to reduce the Death Tax and preserve wealth for your heirs.
We do things differently. Learn about our unique approach to Employee Stock Ownership Plans
To implement an ESOP Transaction at the highest level, our clients will require a team of experts in each of the following specialties
Our team of tax attorneys and CPAs are the most knowledgeable and creative in the ESOP community. Our innovative tax strategies deliver our clients tax savings that others simply can’t envision.
- Section 1042: of the Tax Code enables shareholders to sell on a tax deferred and ultimately tax-free basis. Our Tax Strategy Team has innovative structures that unlock these savings
- Proprietary 1042 Solution: Lazear’s innovative proprietary Section 1042 strategies deliver tax savings while eliminating the inefficiencies resonant in every other structure
- Tax-Free Post-Closing: Our Tax Strategy Team has created innovations that provide almost every client the ability to have their company be tax-free once owned by the ESOP.
- Estate Planning: The federal estate tax rate is 40%, so everything our clients have over a certain amount of net worth is subject to a very high tax upon death. Our innovative strategies will help protect your family from this very significant tax bite.
Our team of former commercial bankers and bank credit underwriters deliver creative structures that maximize our clients’ cash at closing.
- No one in the ESOP community possesses Lazear’s ability to raise capital to support your ESOP transaction. Lazear has over 200 years of banking experience and our teams’ expertise delivers more cash at closing and better financial structures
Our deeply experienced valuation team brings a wealth of industry experience to the negotiation of our clients’ purchase price and champions their value proposition.
- Our valuation team of CPAs, Chartered Financial Analysts and Accredited Business Valuation professionals assures that our clients receive a full and fair market value for their companies.
Our team of CPAs, MBAs and Bankers structure the financing in a manner that protects the Company’s financial flexibility and future growth potential.
Why Choose An Employee Stock Ownership Plan?
FOR ESOP COMPANIES
- Your company can become a tax free entity
- Attract and retain talent at a 4:1 ratio compared to non-ESOP competitors
- ESOP companies are more likely to remain in business than comparable non-ESOPs
- 5% productivity increase the year an ESOP is adopted
FOR BUSINESS OWNERS
- Ability to sell on a tax deferred and ultimately tax free basis
- Preserve your team culture and secure your legacy
- Maintain a leadership role in the company
- Guaranteed buyer at a fair market value
FOR ESOP EMPLOYEES
- Employee-owners median household net worth is 92% higher
- Median job tenure is 53% higher
- Employee-owners are 4 times less likely to be laid off during a recession
How to know if an ESOP is right for Your Business
- You believe in the future of your business.
- You have reasonably stable cash flow.
- You are interested in minimizing taxes through ownership.
- You have minimal to moderate bank debt.
- You have at least 25 W-2 employees.
- You prioritize the personal and financial well-being of your employees.
- You have a strong management team or the ability to recruit new team members.
- You maintain good financial record keeping, such as having annual Reviewed or Audited statements.
- You have a competent accounting and finance team.
By empowering business owners with access to the best resources, insight, and data, we can transform the future of business ownership.
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Compare the benefits of an ESOP with a private equity sale to help you determine which option is best for your business. Discover the advantages and considerations of each approach in this informative discussion.
Client Success: Lyon Video Transitions Ownership to ESOP
Bob Lyon of Lyon Video Inc. shares his experience transitioning to an Employee Stock Ownership Plan (ESOP) with the guidance and expertise of Lazear
Client Success: Norwalk Furniture is Crafting an Employee-Owned Future
As one of Norwalk, Ohio’s largest employers – the decision to sell 100% of the company to an Employee Stock Ownership Plan was a game-changer for the business – and for the future of an entire town.
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