 |
Taxes Are Voluntary - When You Use An Employee Stock Ownership Plan (ESOP)Posted by Roth-IRA-401k on: 2006-06-13 09:57:08 in category:
Investments [ Print | Permalink / 0 Comment(s) ] Taxes Are Voluntary - When You Use An Employee Stock Ownership Plan (ESOP) Frank Amato Taxes Are Voluntary - When You Use An Employee Stock Ownership Plan (ESOP) If you are reading this I was successful in getting your attention. The financial strategy known as ESOP (employee stock ownership plan) has saved business owners one trillion dollars in income tax, that's twelve zeros. $1,000,000,000,000. The infamous October 1987 stock market crash actually resulted in a very positive outcome. Yes, the market quickly bounced back but the lesson to business owners was clear. I began to hear questions like "How will I monetize my equity out of the business?" "Will I get my price?" and "What will my tax consequences be?" For over half a century the ESOP has been used by over 12,000 business owners as a solution to these issues and to provide many other advantages. Business owners can either cash out or phase out of their business and get tax free cash. All that is required is to then invest the proceeds in stock of a U.S. Company during the following twelve months. As an example, if you sold the business for two million dollars you could invest in blue chip dividend paying stocks and look to an annual income of approximately $200,000. The two million received from the sale of your company stock can escape capital gains tax and ultimately be passed on to your children or to whomever you choose. Putting "golden hand cuffs" on key employees is another advantage of the ESOP. In other words, who works harder, owners or employees? Several studies done by business schools including Stanford and the University of Michigan have shown that ESOP companies are more profitable than non-ESOP companies when communication is given due attention. In other words, when employees are made aware that they are important to the bottom line, which they are a part of, they begin to care like owners. Who is an ESOP candidate? Existing ESOP's range from businesses with a couple of employees to the largest ESOPs in the world, Proctor and Gamble and Publix Supermarkets each with well over 100,000 employees. Actually, companies with 20-100 employees represent the majority of ESOP sponsors. Many business owners labor under the misconception that an ESOP means they give up control. This is far from reality as the business owner can retain total control until he/she chooses to pass the gavel. Cash flow can be much improved in a number of ways. Essentially, if income and capital gains taxes can be eliminated the bottom line advantage is clear. Loans conducted through an ESOP are about 40% less costly because both principal and interest are tax deductible. An article which I wrote for the RMA Banker's newsletter spreads the word to all bankers that ESOP's are superb loan prospects. I have worked with several Arizona banks on over one hundred ESOP's and these bankers are eager to participate with ESOP companies. As a means to create capital for corporate growth, ESOP is a superb financial strategy. As an acquisition tool, a well designed ESOP company can buy other companies with before tax dollars rather after tax dollars. Sellers also realize a dramatic advantage as they can eliminate all capital gains tax. Again, a win win for all concerned. Mr. business owner, taxes are voluntary. About the author: Article by Frank Amato, President of Arizona ESOP Group, LLC and Employee Stock Ownership Plan (ESOP) consultant specializing in planning, implementing and administrating ESOP plans that offer business owners rich cash and tax advantages. For more information about ESOP plans, visit http://www.ArizonaESOPGroup.com or call 480-222 0199. |
|
Post new CommentThis site does not allow anonymous comments. Registered members can login to participate. Registration is free and takes only a few seconds |
|