How would I transfer the business to my employees?
Minneapolis attorney Sally Grossman discusses how to transfer the business to the employees.
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One great way to transfer business to employees is through an employee stock ownership plan, and this is a qualified defined contribution retirement plan. And there is a plan document that’s very complicated. I don’t do these. I have partners who do these, so I know enough to be dangerous, but it’s a great technique for the right entrepreneur, because what it can do is allow a portion of the business to be owned in effect by the employees’ retirement plans. And there are some great tax advantages, especially for C corporations with this. Even S corporations.
The portion that’s held in the trust that’s attached to the ESOP plan operates tax exempt, so there is some great tax advantages. In addition it allows an entrepreneur to really preserve a legacy. I mean here you have your business staying in the community, not bought by an outsider, but owned by the employees. And there is some studies that seem to show that ESOP owned companies are more successful than non-ESOP owned companies.