425 N. Martingale Rd, Suite 200
Schaumburg, IL 60173


Mike McCarthy 847-944-7920,Elias Friedman 847-944-7922,Cynthia Bridges Jones 847-944-7944,Meredith Fiocchi 847-944-7921,Kim Smith 847-944-7923,Jennifer Shulman 847-944-7912Toll-Free 844-378-5237




There are several advantages and disadvantages in deciding to implement an ESOP plan. They include the following and more which we can discuss at length when you are analyzing this option.

Advantages of implementing an ESOP plan to own the business go beyond the wealth that is generated from a transaction. The ongoing tax benefits, in the instance where a company is an S corporation, (ESOP owned S-corps are not subject to corporate tax), greatly enhance the ability of the business to pay down the ESOP debt post-transaction, and can give them an ongoing operating advantage over their fully-taxed competitors. In addition, when properly communicated, an ESOP should create an espirit de corps, meaning an enhanced sense of satisfaction and pride in the employees who now own part of the business. Studies have shown time and again that ESOP companies generally have lower turnover, higher productivity, and weather the storm better than their non-ESOP brethren.

Disadvantages of selling to an ESOP are also some of the reasons that a seller may choose, after careful consideration, not to do an ESOP transaction. They may include valuation and other issues. An ESOP must pay fair value for the shares; it will not pay a discounted price and it cannot get into a bidding war with an outside buyer. Also, if it is a leveraged transaction, that debt may create too much leverage for a business dependent upon leverage to grow or operate. It may not be feasible to take on the debt required to buy out the selling shareholder.

ESOP 101

FINRA’s BrokerCheck Obtain more information about our firm and its financial professionals
FINRA’s BrokerCheck Obtain more information about our firm and its financial professionals