H2R CPA Blog

ESOPs as an Exit Strategy

H2R CPA Partner, Lucas Rihely, CPA and Senior Associate, Cameron Zandier, CPA, MST, recently wrote an article published in the July/August 2023 issue of Breaking Ground magazine, a publication of the Master Builders Association of Western Pennsylvania. The article, “ESOPS as an Exit Strategy for Construction Companies” can be found on page 41 of the issue (page 43 of the PDF file). Key takeaways from the article include the following:

  • An increasingly popular exit strategy for business owners is to establish an Employee Stock Ownership Plan (ESOP). ESOPs allow employees to own company stock while also allowing the original business owner to retain control.
  • ESOPs come with their share of pros and cons.
  • Because ESOPs invest in company stock, employers that are qualified to sponsor an ESOP are generally limited to incorporated entities taxed under Subchapters C or S of the Internal Revenue Code.
  • It is common for ESOP transactions to involve a significant amount of leverage relative to the total value of the business. Because of this, care must be taken during the planning phase to understand the impact that the ESOP has on the balance sheet of the corporation.
  • ESOPs may not be beneficial for every business owner but should be considered because of the many advantages it can provide to both you as an owner and your employees.

Feel free to contact your H2R CPA liaison and they will be happy to assist you with any questions.