Benefits Of The ESOP To S Corporations

• 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; S corporation shareholders that own 80% of company stock in an ESOP pay income taxes on 20% of corporate earnings (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.

• Owners can perpetuate the business into the hands of "key" employees or family.

• Can acquire another company with pre-tax dollars.