ACCOUNTANTS

Elevate your advisory services with ESOP expertise

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Empower Your Clients with Effective Succession Planning

As a trusted advisor, you play a crucial role in helping your clients navigate the complexities of succession planning. Employee Stock Ownership Plans (ESOPs) are a valuable option that can offer significant benefits for privately held companies.

ESOP Guide for Accountants
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You Are A Trusted Advisor

As an accountant and trusted advisor, you play a crucial role in helping your clients navigate the complexities of business ownership. Your insight of company history, culture, and financial results along with your role in compliance and facilitating strategic conversations is crucial in helping business owners make informed decisions.

With this in mind, your expertise can help clients navigate the challenges of succession planning. 

Common challenges and solutions:

  • Succession readiness: Help clients identify and prepare the next generation of leaders.
  • Tax implications: Advise on the tax advantages of various succession planning options.

Your clear guidance and strategic advice empowers business owners to make confident, well-informed decisions about their future, ensuring a smooth and successful ownership transition.

“Succession planning isn’t just about numbers; it’s about aligning leadership, ownership, and company culture for long-term success. We use financial insights to bring these crucial conversations to the forefront and facilitate conversations and communication to  help business owners find the best option.”
- Brad Weckwerth, Vrakas CPAs and Advisors

Why Consider An ESOP?

ESOPs provide a powerful tool for succession planning, offering a range of financial and operational advantages. By facilitating conversations and bringing your expertise to the table, you can help your clients explore the potential of ESOPs.

Here’s an in-depth look at how ESOPs can be advantageous in succession planning:

  • Tax savings. One of the most compelling advantages of ESOPs is the significant tax savings they offer to the corporation. For companies that are 100% ESOP-owned and structured as S-Corporations, federal income taxes are effectively eliminated. This means that the profits of the company are not taxed until distributed to the participants upon retirement, which can translate to substantial savings allowing companies to reinvest more capital back into their operations, thereby fostering growth and stability.
  • Financial flexibility. ESOPs provide companies with enhanced financial flexibility. The ability to make tax-deductible contributions means that companies can use their tax savings to pay down debt, reinvest in the business, or fund other strategic initiatives. 
    This financial flexibility is particularly beneficial during economic downturns or periods of market instability, as it allows the company to navigate challenges with greater ease and less financial strain.
  • Employee motivation and retention. When employees have a stake in the company, they are more likely to be engaged and committed to the company’s success. This sense of ownership fosters a culture of collaboration and loyalty, leading to higher productivity and lower turnover rates. Employees who see the direct benefits of their hard work in the form of company shares are more likely to stay with the company long-term, reducing recruitment and training costs.
  • Legacy preservation. For business owners who are deeply invested in the legacy of their company, an ESOP can be an excellent succession planning tool. This method of succession planning preserves the company’s legacy and values, which can be particularly important for family-owned businesses or companies with a strong sense of identity and community involvement.
  • Improved cash flow. The tax advantages associated with ESOPs can lead to improved cash flow. With reduced tax liabilities, companies have more available capital to reinvest in their operations. This can be used for various purposes, such as expanding the business, upgrading technology, or increasing employee benefits. Incorporating ESOPs into your clients’ succession planning not only secures their business legacy but also offers substantial financial and operational benefits that foster long-term growth and stability.
“An ESOP was a great choice for me because I knew I wanted to see my employees succeed well into the future. I knew with an ESOP, I was leaving the company in good hands.”
- Business Owner

ESOP Statistics

According to the National Center for Employee Ownership employee owners are growing across the United States and the benefits of ESOPs continue to expand: 

  • There are 6,533 ESOPs in the United States, holding total assets of over $2.1 trillion dollars.
  • In 2021, the most recent year for which data is available, 283 new ESOPs were created, covering 36,355 participants.
  • ESOPs cover nearly 15 million participants, of whom over 10.7 million are active participants—those currently employed and covered by an ESOP.
  • ESOPs paid out over $175 billion dollars to participants in 2021.
  • Total contributions to ESOP accounts were over $101 billion dollars in 2021, an average of $6,890 in contributions per participant.

Is Your Client a Good Fit for an ESOP?

Employee Stock Ownership Plans can be a powerful tool for succession planning, but they are not a one-size-fits-all solution. 

As a trusted advisor, it’s crucial to assess several factors to determine if an ESOP is suitable for your clients. Here are key considerations to evaluate:

  • Company Culture. A strong company culture is essential for the success of an ESOP. Companies with a collaborative, transparent, and employee-focused culture are more likely to thrive under an ESOP structure.
  • Profitability. Profitability is a major factor in determining ESOP suitability. ESOPs are less suitable for companies in turnaround or crisis situations. Companies expecting significant improvement in 3-5 years may struggle to implement a successful ESOP. Profitability should be stable, and the business should be generating enough cash flow to support the ESOP transaction and ongoing operations.
  • Strong Leadership and Infrastructure. A company with robust infrastructure is a prime candidate for an ESOP. This includes having a solid management team, established processes, and a willingness to invest in the company’s future.
  • Leadership Legacy. For business owners looking to preserve their legacy, an ESOP can be an excellent option. It allows them to reward loyal employees and ensure the company’s culture and values are maintained. However, the owner must be willing to stay involved during the transition period, typically 5-10 years, to help steer the company and mentor new leadership. If you choose to sell to a readymade ESOP, you have additional options. You can learn more in our blog here.
  • Willingness to Explore Alternatives. Owners must be open to exploring different succession planning structures, even those they might not initially understand. If the owner seeks a straightforward exit with a large immediate payout, an ESOP might not be the best fit.
  • Financial Implications. While ESOPs offer significant tax advantages and financial flexibility, they also come with compliance costs and responsibilities. It’s essential to weigh these factors against the benefits. Ensuring the company has the financial health to support an ESOP is crucial. But it’s important to note, selling to an existing or readymade ESOP removes some of these barriers. Learn more in our blog here.

By carefully considering these factors, you can guide your clients toward the best succession planning option for their unique situation.

Curious about the best choice for your clients? Learn more about ESOP Holding Company Vs. Private Equity Company Mergers and Acquisitions.

Advantages of Working with an ESOP Holding Company

Working with an ESOP holding company offers a streamlined, efficient method to transition into an ESOP structure, minimizing the learning curve and maximizing benefits.

If your clients want to preserve their legacy through an ESOP, working with an established and successful ESOP holding company can turn their dream into a reality.

Advantages of working with an established ESOP Holding Company:

  • Established infrastructure for ESOP management. An established ESOP holding company provides a robust infrastructure for managing the complexities of ESOP administration, ensuring smooth and efficient operations.
  • Reduced compliance costs. By leveraging the resources of an experienced ESOP holding company, businesses can reduce and share the costs associated with compliance and regulatory requirements.
  • Expertise in ESOP valuations and transactions. With specialized knowledge in ESOP valuations and transactions, ESOP holding companies ensure accurate assessments and seamless execution of ESOP-related processes.
  • Long-term support and stability. An established ESOP holding company offers long-term support and stability, helping businesses navigate business growth.
  • Employee retention and reward. Partnering with an ESOP holding company enhances employee retention by creating an employee ownership culture. This structured and well-managed employee ownership plan boosts morale and engagement as all employees work together toward a common goal.
  • Legacy preservation. Working with an experienced ESOP holding company helps preserve the legacy of the business, ensuring that its values and mission continue to thrive under employee ownership.

By partnering with an established ESOP holding company, your clients can seamlessly transition to employee ownership while maximizing the benefits and preserving their business legacy.

“Working with OwnersEdge has transformed our business and preserved our business legacy.”

Ready to Help Your Clients? Start Here!

By sharing information about the benefits of working with an ESOP holding company, you can provide your clients with a viable, beneficial option for succession planning. Your role as a trusted advisor can help ensure a smooth transition and lasting legacy for their businesses. 


Empower your clients with the knowledge and tools to make informed decisions about their business succession. ESOPs offer a unique and advantageous route, and with your guidance, they can achieve their goals while preserving their legacy by working with an ESOP holding company. 

Contact us to learn more about how we can support you and your clients in exploring the benefits of ESOPs. Our team is ready to assist you in every step of the process.