Q:
Do the
employees own the company stock?
A: No. The stock is owned by the ESOP trust
and is in the name of the trust. The
employees only have beneficial interest.
Q: Do
employees vote the stock held by the
trust?
A: No. The Company's Board of Directors
appoints a Committee which instructs the
Trustee on how to vote the stock. The
shareholder (owner) may be on the Committee
and the Trustee.
Q: Do the
employees receive financial information on
the company?
A: No. They only receive a statement at the
end of the plan year of the total in their
account and their vesting, plus a summary
of ESOP's net assets, income, and
expenses.
Q: What
is the value of the business?
A: This is determined by a professional
appraiser following the guidelines set by
the Internal Revenue Service (IRS).
Q: Is it
possible to sell stock to an ESOP and pay
no federal or state taxes?
A: Yes. Shareholders in a closely held
company can sell their stock to the
Company's ESOP and defer and possibly
pay no taxes. There are certain regulations
pertaining to this sale so a professional
ESOP practitioner should be
consulted.
Q: How
does the ESOP increase the Company's
cash flow?
A: Monies that would have gone to pay taxes
are invested in the company by the ESOP
purchasing Company Stock.
Q: Is it
possible to convert a profit-sharing plan
to an ESOP?
A: Yes. Such a conversion avoids a company
having two employee benefit
plans.
Q: Can a
company have an ESOP and 401(k)
plan?
A: Yes. The 401(k) plan and the ESOP can be
combined to be one plan or can be separate.
Q: What
is the cost to install an ESOP?
A: Costs are dependant on the ESOP design and
the amount of service SCS will provide for
a company.
Please call us for a fee quote.
Q: Will
the employees try to influence, or direct
the Company's operations?
A: No. Experience has shown that there is
no negative response on the part of
employees. Research has shown that when
presented correctly, the ESOP creates
additional productivity.
Q: Is the
ESOP a plan that creates a
"market" for
shareholders?
A: Yes, and often with no taxes paid on the
sale.
Q: If an
owner sells his stock, does he relinquish
his company control?
A: No. Even with a 100% ownership by the
ESOP, the owner can still control and
operate the company.
Q: Does
the ESOP negate other company stock
benefits and incentives?
A: No. The Company can still continue with
their stock Plans, i.e., stock options,
stock purchase, etc.
