The ESOP is essentially a stock bonus plan in which employer stock may be used for contributions. The advantages to the employer are that contributions are tax-deductible and costs are totally flexible, subject to required loan payments. The plan is easy for the employees to understand and can provide them with permanent life insurance benefits that need not expire or require costly conversion at retirement age.
Since all or most of the assets may be invested in employer’s stock, this is a good method for raising additional capital without going to the market place. In effect, the corporation can raise capital with deductible contributions to its plan. Stock, rather than cash, can be contributed to the plan, and the ESOP may be used to facilitate the buyout of a stockholder. Steve and Keriti describe the different corporate entities and how they interact with ESOPs.
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Steve Savant is the host of the daily producer show, Let’s Get Down to Business, and the weekly consumer show, Steve Savant’s Money, the Name of the Game. Steve is the number one online author and videographer of insurance content. During his 30-year career in the financial services industry,... More