Benefits of an employee stock ownership plan in succession planning




Burke, Megan M.

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Association of International Certified Professional Accountants


Employee stock ownership plans (ESOPs) provide numerous benefits for small business owners and their employees, many of which are realized while the owner is still actively engaged in the business. In addition, proper planning for the owner's exit from the business can result in sizable tax savings. Many owners take advantage of the opportunities under Sec. 1042, which permits nonrecognition (or, more accurately, deferral) of gain on the sale of stock to an ESOP (or a worker-owned cooperative) if the seller purchases qualifying replacement property. This benefit can be magnified by using either a charitable remainder trust (CRT) or a family limited partnership (FLP) along with additional trusts. Although the IRS has recently increased its scrutiny of FLPs, owning an active business through an FLP should bolster the position that the structure has the characteristics of what the IRS considers a "good" FLP.


Article originally published by Journal of Accountancy. Published online 2015.
Permission to deposit the published version was given through direct contact with the publisher. For more information please see the faculty member's entry in Project INDEX -- EDH 7/18/23


Employee stock ownership plans, Charitable remainder trust, Family limited partnership


This is the published version of an article that is available at Recommended citation: Burke, M. M. (2015, October 1). Benefits of an employee stock ownership plan in succession planning. Journal of Accountancy. This item has been deposited in accordance with publisher copyright and licensing terms and with the author’s permission.