Benefits of Being an ESOP Firm

Benefits of Being an ESOP Firm

by Brian Sweeney, CPA

October 16, 2019 β€” Imagine you own a business, and it's profitable. While it's been great running the show, you'd like to be able to divest some of your time away without selling to a third party or introducing heightened risk to your company. What's more, what if you could motivate employees at the same time?

Employee Stock Ownership Plans (ESOPs) are often overlooked as a succession strategy, but they deserve your consideration. Redpath and Company is proud to have been a 100% employee-owned ESOP accounting firm since 2003. You can cash-out owner equity by offering shares of ownership to the employees themselves. By offering them a piece of the rock, it can be a win-win scenario.

The Opportunity

ESOPs allow business owners to monetize their business interests. They're also great for employees, serving as a qualified retirement plan. Employees can indirectly own the company through the ESOP. Financing is from a bank, and the debt is serviced by deductible retirement plan contributions from the company to the ESOP. Cash flow from the operating company goes to the ESOP on a fully-deductible basis. This includes both principal and interest. The ESOP then pays back the bank debt. What's more, in most circumstances the business owner can remain at the helm of the company.

The Benefits

ESOPs offer a number of significant benefits for business owners and their companies, including:

  • bank financing for the buyout.
  • no immediate taxable gain to the owner.
  • a steady, regular cash stream to the owner.
  • increased cash flow for the business.
  • the owner stays at some level of control.

Contributions to fund any bank debt are tax-deductible by the operating company. Furthermore, many business owners would like to see their legacy continue despite their planned exit. ESOPs have an advantage in that selling owners can generate diversity and liquidity while retaining independence. Also, the owner(s) can maintain an active role past the transfer to an ESOP structure.

For more information about ESOPs, please contact Brian Sweeney today at 651-407-5856 or

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Brian Sweeney, CPA

Brian Sweeney, CPA

Brian Sweeney is a partner, the employee ownership (ESOP) team leader, and also a client manager specializing in financial statement audits, business and systems consulting, management and advisory services, and mergers and acquisitions. He works with closely-held businesses in a variety of industries, including manufacturing and wholesale distribution, with a specialty focus on employee-owned companies. As Redpath’s ESOP team leader focusing on client services, financial health, and cultural consulting to employee-owned companies. He works to protect S Corp ESOPs and stays up-to-date and knowledgeable on issues, changes, and legislation through involvement and committee leadership roles in the ESOP community. Brian was elected to and serves on the board of Directors for the National Center of Employee Ownership. He is an active member of the Finance Committee for the ESOP Association, the Government Relations Committee of the ESOP Association Minnesota/Dakotas Chapter, and Employee-Owned S Corporations of America. Brian is a regular presenter on employee ownership topics at local, regional, and national events. He has provided public accounting services at Redpath and Company since 1998.