We analyze the financial impact an ESOP will have on a company and the selling stockholders. We prepare a pro forma analysis of the cash flows, earnings, values, debt amortization, and the ESOP’s assets. We also project the ESOP’s repurchase liability. In addition, we explain the financial and other ESOP implications to prospective lenders, major shareholders, and other corporate advisors.


The feasibility of S Corporation versus C Corporation status is critical to the ESOP decision.  Eligibility for the IRC 1042 “tax-free” rollover is carefully reviewed.


We provide consulting services focusing on structuring and securing favorable financing. Having worked extensively throughout the U.S. for over 30 years with banks and private equity groups, we structure financing to meet seller and corporate objectives, including senior and subordinated debt..


We arrange for the preparation of the legal documents necessary to install an ESOP. These services include the preparation of the ESOP itself, the Trust document, Summary Plan Description, corporate resolutions, and the documents necessary to obtain a Favorable Determination Letter from the IRS.


We will design and install an Employee Stock Ownership Plan to be effective for current or next fiscal year, as determined by corporate and shareholder objectives. The costs associated with establishing the ESOP are outlined in a written proposal prior to commencement of services.


We develop and negotiate the transaction on the basis of the financial analysis to address the needs of the sellers, buyers, the corporation and its employees and use the flexibility of ESOPs to provide “win-win” situations. Transactions include the sale of a minority or majority interest, as well as the divestiture of a subsidiary or division of a parent company.


Employee Ownership is an integral part of privatization law throughout the world. Since 1989, we have been involved in privatization projects in Poland , Russia , Lithuania , and Argentina , representing major U.S. and foreign corporations, as well as operating under contracts with the World Bank.   We have also assisted the state of Virginia in studying the feasibility of ESOP privatization.


We prepare and present a communication program for your employees, explaining the concept of Employee Stock Ownership and the particulars of your ESOP in plan English and answering any questions concerning the ESOP.


An Administrative Procedures Manual covering substantially all aspects of the operation of the ESOP is provided and a third party administrator, meeting your specific needs, specializing in ESOP administration is recommended.

Modify/Coordinate/Utilize.  (Existing ESOPs only)

The answer to your ESOP question depends on individual and corporate objectives, the age and ownership level of the ESOP, corporate cash flow and earnings, corporate status (C or S, public or private) etc. While the flexibility of the ESOP can be a substantial advantage in structuring ESOP transactions and in ongoing ESOP operations, flexibility is a two-edged sword. The challenge is for the ESOP to meet shareholder’s and corporate objectives, and stay in compliance with all legal and regulatory requirements. The ability of S corporations to sponsor ESOPs is an example of an option that requires serious examination.

ESOP Services, Inc. is uniquely qualified to assist ESOP companies in determining how to best achieve their objectives. Key issues include:

    1. Corporate governance
    2. Additional equity incentives for key management and/or board members
    3. Acquisition or Divestitures utilizing an ESOP
    4. Election of S corporation status
    5. The impact of S corporation distributions on ESOP allocations and debt repayment
    6. Establishing a flexible ESOP distribution and stock repurchase policy that addresses:
      1. Dilution
      2. Company cash flow
      3. Adequate security requirements
      4. Diversification elections
      5. Administrative compliance & policies
    7. 401 (k)/ESOP combinations
    8. Valuation of closely held stock
    9. Designing plans and policies that exceed normal contribution limits
    10. Deferring the allocation of leveraged ESOP shares
    11. Charitable giving
    12. Termination of an ESOP

The list, of course, goes on and on, but if you are a company executive charged with operating an ESOP, you already know that.

Can we be of assistance to you?

A call or e-mail allows us to determine the extent to which our services match your needs.

If we can’t help, we will recommend someone who can.