May 12, 2011

Tax Alert for Business Owners

Dear Business Owner,

This may be the opportune time to take action to avoid the increase in capital gains tax rates that will take effect after 2010.

As you may know, the Bush tax rate cuts, including the current 15% capital gains tax rate, are slated to expire at the end of 2010.

In addition, if the U.S. economy starts to turn around in the third or fourth quarter of this year, we believe there is a strong possibility that the Obama budget for 2010 will propose an increase in the capital gains tax rate starting in 2010 rather than in 2011.

Assuming that you have an interest in locking in the capital gains tax at the current rate but do not wish to sell your entire company to a third party, there are two tax strategies that you can use to lock in the current capital gains tax rate, provided that you act before the end 2009 or 2010.

The first tax strategy is to sell part (or all) of your stock to an ESOP and elect tax-free rollover treatment under a special tax code section that only applies to ESOPs. Under this provision the capital gains tax is deferred for as long as you want, provided that your company is a C corporation (or converts to C status,) and provided that the sale proceeds are reinvested in qualified replacement securities.

The second tax strategy is to sell part (or all) of your stock to an ESOP and elect to pay tax on the entire transaction in 2009 or 2010. Under this approach, all of the gain will be taxed at the current capital gains tax rate. Even if you receive a seller note for a portion of the purchase price, the entire sale will be taxed at the current tax rate, provided that you do not elect installment sale treatment on your seller note.

More information about the tax and financial advantages of an ESOP can be found in the ESOP Information Section of our website where you can also watch our most recent web seminar entitled The ABCs of ESOPs. If you are interested in obtaining a Free Preliminary Analysis as to how can ESOP could be designed to accomplish your objectives, please fill out the Confidential Feasibility Questionnaire section of our website.

Very truly yours,

John D. Menke
President

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In 2024, many companies are looking for ways to minimize corporate taxes and maximize cash preservation, while also maintaining competitive employee benefits. Other companies are looking for ways to create liquidity for shareholders who wish to retire or reduce their ownership stake.

This 90-minute web seminar is free-of-charge and will show how ESOPs can be structured to accomplish these and other objectives that may be essential to the sustainability and success of your company in 2024!

Among the topics that will be covered are the following:

    • What is an ESOP and what benefits can an ESOP provide to companies and their owners?
    • What are the basic ESOP structures?
    • How are ESOPs typically structured to accomplish any one or more of seven different shareholder/company objectives?
    • What benefits can ESOPs provide for shareholders of S corporations?
    • How are ESOPs typically structured to accomplish any one or more of seven different shareholder/company objectives?
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    • How is ESOP financing structured?
    • What is the impact of an ESOP on employee motivation and productivity?

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October 23, 2024
Join us for a free, 90-minute web seminar on Wednesday, November 20th, 2024, where industry experts will guide you through the essential benefits of ESOPs. You’ll learn how ESOPs can be structured to meet your specific business needs, ensuring the sustainability and success of your company in 2024 and beyond.