Charles Marsala Discusses Employee Stock Option Plans

Charles Marsala January 11, 2015 0
Charles Marsala Discusses Employee Stock Option Plans

Employee Stock Ownership Plans, ESOPs, can offer advantages to business owners, companies, and employees.
An ESOP is a retirement plan designed to provide employees with an ownership interest in the company by investing primarily in stock of the employer
The ESOP is funded with tax-deductible contributions by the employer, which can be in the form of company stock, or in cash which is used to purchase company stock. An ESOP operates through a trust, under the direction of a trustee or other named fiduciary.
An ESOP can be used to finance ownership transition, raise new equity capital, refinance outstanding debt or acquire productive assets.
ESOP participation can improve employee morale and productivity and reduce turnover.
One of the most popular uses for an ESOP is to provide a ready market for some or all of the shares owned by shareholders in a closely held company.
An ESOP provides a majority or controlling shareholder an exit strategy when he or she is ready to retire.
Contributions to the ESOP, in cash or stock, are allocated to the accounts of participating employees in the trust established as part of the ESOP.
The accumulated balance in a participant’s account is distributed to the participant after his or her retirement or other termination of employment with the company. So long as a participant’s account remains in the ESOP trust, the value of the account– including the appreciation in stock value– is not taxable to the employee.
ESOPs must be specifically designated as an ESOP in the plan document, and must comply with special ESOP requirements of the Internal Revenue Service (IRS) for reporting and compliance.
About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at

Comments are closed.