An employee stock ownership plan (ESOP) offers significant advantages to a business owner. The ESOP will enable your company to buy you out, using tax-deductible company distributions. An ESOP enables your employees to share in the current and future economic rewards of ownership. An ESOP can be utilized to raise capital for nearly any purpose on a tax-deductible basis or to create shareholder liquidity on a tax-advantaged basis.

An ESOP is a qualified, defined-contribution employee benefit plan that predominantly invests in the stock of the employer company. ESOPs are “tax-qualified” in that in return for meeting certain regulations designed to protect the interests of plan participants, ESOP sponsors (business owners) receive various tax benefits. ESOPs are “defined contribution plans” whereby the employer makes yearly contributions that accumulate to produce a benefit that is not defined in advance.

Pursuant to Internal Revenue Code §401(a)(28)(C), a company that has an ESOP must conduct an independent appraisal of its shares each time the plan acquires stock and at the end of each plan year. The ESOP transactions must be based on the current fair market value of the sponsoring company’s shares. A valuation expert must be familiar with the requirements of the Internal Revenue Service’s Revenue Ruling 59-60 and the proposed Department of Labor regulations.

FFG Valuations provide the following ESOP valuation services:

We value the business prior to the establishment of the ESOP for use by the client in working with their financial and legal advisors
We prepare fairness opinions for the company Board of Directors and the financial institutions when the ESOP is established.
We provide ongoing annual updates for compliance with the IRS and DOL regulations for the plan Trustee.

Contact Us today to learn how we can work together as a member of your ESOP team.