By Lian Gravelle, Esq.
When considering retirement, a new venture or simply a diversification of assets, business owners find themselves faced with the prospect of selling their business. It’s possible to sell your business to a third-party and walk away into the greener pastures of retirement on the same day. But others refrain from selling even a portion of their company because they are not ready to quit. An employee stock ownership plan (“ESOP”) provides owners with a competitive buyer and allows them to decide their level of involvement in the company after the sale.
An ESOP-owned company may be structured to allow a business owner to sell all of his shares and continue to run the company on daily basis. Instead of dismantling the company, the owner transitions the day-to-day operations of the company to his chosen management team and continues to groom them overtime.
Selling shareholders can maintain their seat on the board of directors after a sale. ESOP-owned companies often retain the services of an active owner through a multi-year employment agreement in order to maintain the profitability and stability of the company after the sale. ESOPs give the business owner a diversified investment portfolio and the opportunity to continue her involvement to ensure the success of the company.
An ESOP may be one of a few mechanisms available to transition ownership of your company and allow you to relinquish control slowly over time. It may not be the right move for you, but you should consider a sale to an ESOP in any succession plan.
Lian Gravelle, Esq., is an ESOP compliance counsel who works at ESOP Plus®: Schatz Brown Glassman LLP in Rochester. Visit www.esopplus.com or email firstname.lastname@example.org.