ESOPs - Savvy Strategy For Tax Management, Succession, and Continuity

פרטים

Changing demographics, impending changes in taxation, and challenging economic conditions have made ESOPs a creative strategy to ensure organization survival and success. This publication defines issues that must be fully considered before installing an ESOP, and highlights the common attributes of successful installations. Use this book to chart a course through succession issues and transition ownership issues with a minimum impact to financial results. The book offers you practical strategies to deal with current economic realities and taxation challenges, including the following: * Increasing tax rates in the near future will make ESOPs a tax efficient option for business owners. * In recessionary times ESOPs control the succession process versus letting probate and inheritance taxes jeopardize the survival of their organization. * Financing for almost any business transaction is difficult; ESOPs are very seller finance friendly. ESOPs represent an effective exit vehicle for Baby Boomer owners.

מידע נוסף

מידע נוסף
עמודים	224
פורמט	Paperback / softback
ISBN10	1937350541
יצא לאור ב	NC
תאריך יציאה לאור	30 במאי 2017
תוכן עניינים	Introduction ix Chapter 1: Employee Stock Ownership Plan History and Background Overview of Employee Ownership and Employee Stock Ownership Plans 1 Underlying Philosophy of ESOPs 1 Legislative History 2 Employee Retirement Income Security Act of 1974 3 Revenue Act of 1978 3 The Chrysler Loan Guarantee Act of 1979 3 The Economic Recovery Tax Act of 1981 3 Deficit Reduction Act of 1984 4 Tax Reform Act of 1986 4 Small Business Job Protection Act of 1996 4 Taxpayer Relief Act of 1997 4 The Economic Growth and Tax Relief Reconciliation Act of 2001 5 Jobs and Growth Tax Relief Reconciliation Act of 2003 5 Impact on ESOPs 5 ESOPs Today 6 Summary 7 Chapter 2: Significant Events and Organizations Regulations and Government Agencies 9 Employee Retirement Income Security Act of 1974 9 IRS 11 Securities and Exchange Commission 13 DOL 14 General ERISA Fiduciary Considerations 16 Proposed DOL Regulations Specifi c to ESOP Valuations 19 Major Exceptions to ERISA for the Benefi t of ESOPs 20 ESOP and ERISA Litigation 21 Summary 22 Industry Organizations and Standards 22 The AICPA 22 The ESOP Association 26 National Center for Employee Ownership (NCEO) 28 Ohio Employee Ownership Center 30 Appendix 2A IRS Form 5309, Application for Determination of Employee Stock Ownership Plan 31 Chapter 3: Employee Stock Ownership Plan Transaction Mechanics Traditional Uses of an ESOP 35 Provide Liquidity and Diversifi cation for Shareholders 36 Provide a Means of Capital Formation 36 Finance Corporate Acquisitions 36 An Incentive to Increase Employee Productivity and Retain Personnel 36 Provide a Succession Plan 37 Provide Liquidity in Divorce Situations 37 Provide Negotiating Leverage for Any Proposed Transaction 37 Summary 38 Alternatives to an ESOP 38 Sell or Transition the Business to Family Members 38 Sell to Management or Key Employees 38 Sell or Merge With a Third Party Financial Buyer 38 Sell or Merge With a Third Party Strategic or Investment Buyer 39 Sell Stock Through an Initial Public Offering 39 Liquidate the Business 39 Summary 39 Basic Features of ESOPs 40 Operating Considerations of an ESOP 40 Contributions to an ESOP Are Tax Deductible Within Statutory Limits 44 Contributions to an ESOP Based on Dividends (C Corporation) 50 Contributions to an ESOP Based on Distributions (S Corporation) 52 IRC Section 1042 Tax-Free Rollover (C Corporation) 54 Nontaxable Income Related to ESOP Stock (S Corporation) 58 Assets in ESOP Remain Untaxed Until Retirement 59 Appendix 3A Sample Documents Relating to the Internal Revenue Code Section 1042 Election 61 Sample Statement of Election 62 Sample Statement of Consent for ABC, Inc 63 Sample Statement of Purchase 64 Chapter 4: Employee Stock Ownership Plan Transactions and C Corporations Sample Facts ABC, Inc (C Corporation) 65 Abbreviated Financial Statements 66 FMV of Common Stock for the Purposes of an ESOP 67 Common Entities in Transactions 68 Example Stock Contributed to ESOP (Capital Formation ESOP) 69 Example Leveraged ESOP With IRC Section 1042 Rollover 70 IRC Section 1042 Restrictions 71 Example Prefunded ESOP With IRC Section 1042 Rollover 72 IRC Section 1042 Restrictions 74 Example Leveraged ESOP With IRC Section 1042 Rollover and Control 75 Example Leveraged ESOP With IRC Section 1042 Rollover, Multiple Classes of Stock, and Control 78 Summary 83 Chapter 5: Employee Stock Ownership Plan Transactions and S Corporations Sample Facts ABC, Inc (S Corporation) 85 Abbreviated Financial Statements 86 FMV of Common Stock for the Purposes of an ESOP 87 Common Entities in Transactions 88 Example Stock Contributed to ESOP (Capital Formation ESOP) 89 Example Leveraged ESOP (Paying Capital Gains) 90 Example Prefunded ESOP With No Bank Debt 92 Example Convert to C Corporation Leveraged ESOP With IRC Section 1042 Rollover and Control 94 IRC Section 1042 Restrictions 98 Example Leveraged Sale of 100 Percent to the ESOP in a Single Transaction 100 Summary 103 Chapter 6: Advanced Employee Stock Ownership Plan Applications Mergers and Acquisitions Buying a Target Company With Pretax Dollars 106 Purchase of Stock 106 Purchase of Assets 107 Mergers and Acquisitions Extending the Internal Revenue Code Section 1042 Rollover to a Target Company 107 Extending the IRC Section 1042 Rollover to an Investment in Another Closely Held Company 108 Multiple Investor ESOPs 108 Charitable Giving and ESOPs 109 Contributions of Closely Held Stock to Charities 109 Charitable Remainder Income Trusts and ESOPs 110 Summary 110 Chapter 7: Valuation Issues and Considerations Issues Regarding ESOP-Based Valuations 112 Identify the Client 112 Standard of Value 113 IRS 113 DOL 115 Valuation Independence and SOX 119 Impact of SOX 119 AICPA Newsletter: CPA Expert, Summer 2003 119 Valuation Perspective on the Repurchase Obligation and the Put Option 120 Valuation Report Date and Events 121 Opinion of Value at a Point in Time 123 Approaches to Establishing Value 123 Initial Valuation: C Versus S Corporation Considerations 123 Income Approach 125 Market Approach 127 Asset Approach 128 Lack of Marketability Adjustment (Discount) 129 Ownership Characteristics 129 Minority and Control Positions 129 Multistage Transactions 130 Dilution Considerations and Outstanding Shares 131 Dilution With the ESOP Contribution of Newly Issued Stock 132 Leveraged ESOPs Initial Valuation and Annual Updates 133 Annual ESOP Update Issues 134 Fluctuations in Value Between Years 134 Valuation Methodology Issue of Consistency 135 Increasing Value With Time 136 Multi-Investor ESOPs and Allocation Considerations 136 Multiple Classes of Stock in C Corporation ESOP Transactions 137 Practical Valuation Considerations 139 Chapter 8: Administration and Transaction Considerations Initial Considerations and ESOP Feasibility Study 141 Team of Advisors 142 Team of Advisers Summary Have a Transaction Quarterback 145 Feasibility Study 146 Informal Planning Process 146 Written ESOP Feasibility Study 146 Feasibility Summary 147 Strategic ESOP Design Considerations 148 Contribution and Addition Limits to Qualified Plans Expanded 148 Maintaining Both an ESOP and a 401(k) Plan 148 Creation of a Preferred Stock or Super Common Stock for the ESOP in a C Corporation 149 Compatibility With the S Corporation Election 150 Senior Management Compensation and Incentives 150 Special S Corporation Considerations 152 ESOP Trustee and Transaction Considerations 152 Benefits of an Independent Fiduciary 154 ESOP Fairness Opinion 155 Fairness From Only a Financial Viewpoint 155 Common Components of the Fairness Opinion 155 Rights of ESOP Participants 156 Right to Demand Employer Securities 156 ESOP Participant Voting Rights 156 Written Materials 158 Dispute Settlement 158 Diversification Requirements 158 Stock Repurchase Obligation 159 Practical Insights 159 Repurchase Studies 160 Funding the Repurchase Obligation 161 Election: Redeeming the ESOP Stock Back to the ESOP 162 Election: Redeeming the ESOP Stock to the Company Treasury 163 ESOP Termination 163 Plan Termination With Outstanding ESOP Debt 164 Disadvantages of ESOPs 165 Complex Regulatory Environment 165 Fiduciary Responsibilities 166 Initial Cost and Ongoing Expenses 166 Repurchase Obligation 167 Employees Fail to Understand and Appreciate the ESOP 167 Summary 168 Chapter 9: Financial Considerations Financing Overview for ESOPs 169 ESOP Loan Exemption 170 Financing an ESOP Internal Sources 171 Financially Successful Employer (Plan Sponsor) 171 Prefunding the ESOP 171 Stock Contributions to the ESOP 172 Inside Loan From the Company to the ESOP 173 Financing an ESOP Seller Financing 173 S Corporation Application 173 C Corporation Application 174 Leveraged QRP Solution 174 Floating Rate Note 175 Financing an ESOP Third-Party Financing (Bank Debt) 176 Historical Note Repeal of ESOP Loan Interest Exclusion 176 Overview of General Banking Concerns 176 Common Loan Mechanics 177 C Corporation ESOPs 178 S Corporation ESOPs 178 Summary 179 Chapter 10: Litigation and Significant Cases The Employee Retirement Income Security Act of 1974 and ESOPs 181 The Importance of Court Cases 182 The IRS 182 The DOL 183 Significant Court Cases 183 Court Case: Donovan v Cunningham 184 Court Case: Hines v Schlimgen 185 Court Case: Las Vegas Dodge, Inc v US 186 Court Case: Gary L Eyler v Commissioner 187 Court Case: William R Davis v Torvick, Inc 190 Court Case: Delta Star v Patton 191 Chapter 11: Practical Considerations and Employee Stock Ownership Plan Resources Qualifying ESOP Candidates 195 Qualities of Successful ESOP Candidates 196 Characteristics of Less Successful ESOP Candidates 196 Practical Insights Summary 198 Overview of ESOP-Related Resources 198 The EA Publications 198 NCEO Publications 199 The Ohio Employee Ownership Center 199 Other ESOP Resources 200
זמן אספקה	21 ימי עסקים