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- Stockholders can sell all or a part of
their company stock to the ESOP without losing control of the business.
- ESOP shareholders pay no federal and state
(in most states) income taxes on their ESOP stock dividends.
- S corporation shareholders are exempt
from income taxes on corporate earnings (dividends) to the extent of
their ESOP ownership, i.e., a S Corporation that is wholly owned by
an ESOP pays zero federal income tax; ESOPs in S corporations pay no
taxes on the amount of company stock owned by the ESOP, i.e., if ESOP
owns 80% of the company, no taxes are paid on 80% of the profits
(dividends); etc.
- Company can borrow from a bank or other
commercial lender for expansion or other corporate projects and have
a tax write off of both principal and interest on the loan.
- Create a meaningful retirement plan.
- Proven motivator for employees to be more
productive workers because of being employee owners - ESOP shareholders.
- Convert a profit sharing plan into an
ESOP and use existing funds to purchase company stock.
- Owners can perpetuate the business into
the hands of "key" employees or family.
- Can acquire another company with pre-tax
dollars.
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