How does the ESOP benefit stockholders?
One of the most popular uses for an ESOP is to provide a ready market for some or all of the shares owned by shareholders in a closely held company. With an ESOP in place, a majority or controlling shareholder has an exit strategy when he or she is ready to retire. Likewise, an ESOP is often the only market for a minority shareholder in a closely held company. The ESOP rollover described in Question 24 permits a shareholder to sell stock to an ESOP and defer capital gains taxes. This option can also be used to obtain estate planning benefits. With an ESOP, a majority shareholder has the option of selling all or only a portion of his or her stock to increase personal liquidity while maintaining control of the company.
One of the most popular uses for an ESOP is to provide a ready market for some or all of the shares owned by shareholders in a closely held company. With an ESOP in place, a majority or controlling shareholder has an exit strategy when he or she is ready to retire. Likewise, an ESOP is often the only market for a minority shareholder in a closely held company. The ESOP rollover described in Question 24 permits a shareholder to sell stock to an ESOP and defer capital gains taxes. This option can also be used to obtain estate planning benefits. With an ESOP, a majority shareholder has the option of selling all or only a portion of his or her stock to increase personal liquidity while maintaining control of the company. Return to the top of the page.
