ESOPs offer tax benefits to the sponsoring company and its selling shareholders. Although there may be restrictions, ESOP tax advantages include, but are not limited to, the following:
- Contributions to the ESOP of cash or shares may be tax deductible.
- Dividends paid on ESOP shares may be tax deductible.
- Principal as well as interest paid to banks on ESOP loans may be tax deductible.
- Selling shareholders are able to defer capital gains and taxes on shares sold to ESOP.
ESOP shares must be appraised every year by a highly qualified, independent business appraiser. Such valuations have many complexities owing to ESOPs’ unique features. ABA professionals have valued hundreds of ESOPs and would be pleased to assist you.