Companies can fund ESOPs with tax-deductible or tax-free dollars to achieve a variety of corporate objectives.
The most common use of an ESOP is to provide a market for the shares of departing owners of successful closely held companies; however, there are many types of ESOPs.
The rules differ depending not only on whether a company is public or private or is an S corporation or a C corporation but also on whether the ESOP is leveraged (the ESOP borrows money to buy the stock) or non-leveraged.
ESOPs aren’t for every company, but the benefits are substantial in the right fit. We encourage you to take a look at an ESOP to see if it could be beneficial in your situation.