By Lian Gravelle, Esq.
When a business owner begins examining his or her options for exiting the company, the potential for the company to close its current location and displace the employees can cause distress. An employee stock ownership plan, or ESOP, offers a succession plan to address the impact on a company’s employees.
In fact, for many ESOP companies, a similar story emerges. It begins with an owner who can speak to any of his employees about their children and their hobbies. These owners share a conviction that their business and personal success would not be possible without the employees who helped build the company, sometimes even from the first day of operation.
For these owners, the ESOP was the correct mechanism to transition ownership of the company. Instead of dismantling the company, the owner can transition the day-to-day operations of the company to his chosen management team and reward his employees at the same time. Successful ESOP companies in the Rochester area thrive with groomed second generation management teams and experience less turnover than their competitors. These ESOP-owned companies are expanding and hiring more employees instead of dissolving or moving and laying off employees after the original owner of the company retired.
An ESOP is not the right exit strategy for all business owners. But you need to consider all of your options to reward your loyal employees as you develop the exit and succession plan that is best for you.
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.