Employee stock option plans (ESOPs) are qualified retirement plans akin to 401(k) plans except that ESOPs must invest primarily in their own company’s stock. From the looks of it, ESOPs could work for just about any privately held company that expects to grow, has a strong leadership team in place and proven business success. But ESOPs have some disadvantages that prevent them from being suitable for all.Read More
I believe that one of the most important responsibilities that come with owning a business is planning for its evolution. In many cases, this also means planning for the transition of its ownership and management.
Understanding the owner’s perspective on owning his business is critical to creating a successful transition plan. In all cases, this effort should “begin with the end in mind”.
I met a retired business owner at a party recently and he found out I was a CPA. Not that I normally use this as a conversation starter, but my brother mentioned it as he introduced me.
As the night continued, we got to talking about his business and how he started it. What became clear was that he's very proud of what he had built. He sold his business 12 years earlier, but it was still an important part of who he was. As we got to that point, I asked him why he had decided to sell. He said there were consolidations going on in the industry at that time, and felt the industry was changing, and getting harder to compete in. He was then approached with an offer and it seemed like the right time to sell.
At this point, you've already put some thought into implementing an ESOP and feel that it could be a viable option for you as you enter into a succession plan. When making your final decision, however, there are a few things about the ESOP process you as a business owner should be sure not to overlook.Read More
When deciding if an employee stock ownership plan (ESOP) is the right business ownership strategy for your company, there’s a few things you need to consider.
First off, what is an ESOP? An ESOP is an employee-owner program that provides a company’s workforce with an ownership interest in the company. It must follow the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (IRC). An ESOP is also a qualified employee benefit plan similar to a 401(k), but it’s permitted to invest in private company stock and allowed to borrow money from it.Read More
There are plenty of questions that can arise when considering an ESOP for your business. What is an ESOP? What are the benefits of an ESOP? Is an ESOP right for my business? Owners looking to transition out of the business, especially, should look closely and see if an ESOP is right for their company.Read More
When it comes to family businesses, owners are generally more focused on building a legacy for their successors rather than spending the time necessary to plan for the transition. Hours of work are spent addressing the immediate needs of the business while planning for the transition is set aside for another time. This delay can create problems down the line when an owner decides that it is time for him or her to transition from the business. Paying close attention to the following considerations will help you ensure that your family business is ready for that transition phase and new leadership.Read More
When I was fairly young (at which time my kids assume dinosaurs roamed the earth), I would play chess with my grandfather when we visited his house. To be honest, I really didn't remember these games as he passed away when I was in high school. Years later, my grandmother gave me a chess set that my grandfather had commissioned from a woodcarver in Italy. She told me that my grandfather wanted me to have it since he fondly remembered our games. My brother, who never played with my grandfather, got squat.Read More
The best place to start in terms of wrapping your arms around family business succession planning is with the retiring owner’s financial security. What are your objectives? By establishing clear goals, an advisor will be able to quantify success.
What does this mean?
Start managing yourself in the same manner as you would your business. Personal financial statements are a great place to start. When running a business, you create balance sheets and an income statement, so you should do the same with your personal finances. You want to be able to enjoy your retirement without having to worry about where your money is coming from and how long it will last. Analyzing both your financial statement and income statement will give you peace of mind.Read More