Selling to an ESOP

A comprehensive guide for owners, managers, and advisors of closely held companies considering setting up an ESOP in order to buy part or all of the stock of the owner(s). The first half of the book describes how ESOPs work and discusses basic considerations for selling to an ESOP, ranging from valuation to financing to S corporation issues. The second half of the book focuses on the tax-deferred Section 1042 "rollover" that allows selling shareholder(s) in closely held companies to indefinitely defer capital gains taxation on the proceeds from the sale to an ESOP. It also addresses management compensation strategies for ESOP companies. The appendices provide case studies and discuss creating a more productive "ownership culture" at an ESOP company and what the alternatives to an ESOP sale are.

Contents

Introduction
An Introduction to ESOPs
Why Sell to an ESOP?
Lending Considerations for ESOPs
Understanding ESOP Valuation
ESOP Feasibility
How Small Is Too Small for an ESOP?
A Practical Approach to ESOP Contribution and Allocation Limits
ESOPs and S Corporations
An Introduction to Section 1042
Seller-Financed ESOPs and Leveraged QRP Transactions
Partnerships and Section 1042
"Tacking" On to the Section 1042 Seller's Holding Period
Qualifying Sellers for Section 1042 Rollover Treatment When They Sell to Another Company's ESOP
The Prohibited Allocation Rule Under Section 1042
Management Compensation Strategies for ESOP Companies
Reinvesting the Section 1042 Rollover
Case Studies of Section 1042 Rollover Reinvestments
Getting Your Company Ready for an ESOP: The Ownership Culture Perspective
Case Studies of Closely Held ESOP Companies
Alternatives to an ESOP Sale

NCEO, 2002. 7th ed. 366 pp. (6" x 9"), softcover.

Price shown includes shipping. Discount on shipping charges with purchase of more than one copy. FedEx Ground shipping within the U.S.

The BenefitsLink Store is a service of BenefitsLink®, the national employee benefits Web site at
www.BenefitsLink.com.