What business owners know about ESOPs does not always match reality.
By Jerry L. Ripperger |
Updated on September 26, 2013
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There are a lot of things that we just know. We have either simply heard them so many times that we accept them or they seem so logical that we see no reason to doubt their validity. Four things that we “know” from history are:
Business owners planning for their eventual exit from the business often tend to know a lot about Employee Stock Ownership Plans (ESOPs). This knowledge may prevent them from seriously considering the plans as part of their succession strategy. Being able to debunk some of these issues positions you as having expertise with ESOPs and can create opportunities to generate asset and insurance needs.
What we “know”
The truth
Napoleon Bonaparte was short.
Actually, he was 5’7,” which was average for men at the time.
Albert Einstein failed math in school.
Einstein excelled at both math and science in school.
Thomas Edison invented the light bulb.
Although he does get credit for the first practical light bulb, others had actually invented it prior to that time.
A doctor created a monster named Frankenstein.
In Mary Shelley’s novel, “Frankenstein,” a medical student, creates the monster which is unnamed.
Let’s take a look at what business owners know about ESOPs and the reality.
What we “know”
The truth
The owner will lose control of the company.
An ESOP doesn’t change the company’s corporate governance. The board of directors appoints the ESOP trustee which is the legal shareholder and votes the shares on behalf of the retirement plan participants. The board and management remain in control of the company, even when the ESOP owns a majority of the company.
The owner will have to sell the entire company.
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