Benefits for the Corporation

1. Corporation obtains 100% deductibility of PRINCIPAL and interest on an ESOP loan.
2. Corporation can fully deduct DIVIDENDS paid to reduce ESOP debt.
3. Corporation experiences increased cash flow due to the deductibility of principal on an ESOP loan.
4. Collateral for an ESOP loan is created outside the corporation.
5. Corporations engaging in ESOP transactions often obtain preferred terms on ESOP loans.
6. The selling Shareholder's retirement is funded outside the corporation, relieving the company from the burden of funding retirement benefits.
7. Corporation can often experience increased cash flow due to the possible reduction in the seller's corporation-provided compensation.
8. Ability to attract and retain productive employees.
9. Creates a take-over defense by means of a friendly voting block.
10. Ability to give employees equity in the company with no payment on their part, on a tax-deductible basis to the corporation.
11. Corporation can refinance existing debt on a tax-deductible basis.
12. Corporation can merge with or acquire another corporation using pre-tax dollars.
13. Corporation can purchase capital goods using pre-tax dollars.
14. In some circumstances, corporation can recover taxes paid in previous periods.
15. Corporation can increase its net worth and appraised value by rolling over existing qualified plans into an ESOP.
16. Creation of a quasi-public market for Corporate stock - go public internally. Employees have a "put option" and a market for their Company stock. Increased morale.

There is a minimum 54% tax subsidy available in all ESOP transactions!

But that's not all - ESOPs are now available for 'S' Corporations.
With proper structuring, the earnings from an 'S' Corporation can be partially or fully free from Federal Income Tax!

16 Steps to a Successful ESOP Transaction
ESOP transactions are highly sophisticated and require the accomplishment of literally scores of tasks for successful implementation. UBA's internal checklist consists of 150 individual tasks to be accomplished by various team members.

These tasks have been grouped into 16 Steps to a Successful ESOP Transaction. These basic building blocks are presented to help build knowledge and understanding of all the team members involved in an ESOP transaction.

1. Analysis of ESOP Pre-Qualification Form - UBA
2. Comprehensive Meeting with Potential Client - UBA/Attorney/CPA
3. Feasibility Study - UBA
4. Comprehensive Valuation Study - UBA
5. Lender Negotiation and Selection - UBA/Client/CPA
6. Analysis of Existing Qualified Plan (if any) - UBA/Attorney
7. ESOP Plan Design - Attorney
8. Document Preparation - Attorney
9. Repurchase Liability Study - UBA
10. Funding Analysis of Repurchase Liability - UBA/Client/Insurance Professional
11. Initiation of Bank Financing - UBA/Client
12. Qualified Replacement Property Recommendations - Broker/Client/CPA
13. Implementation of ESOP - UBA/Attorneys/CPA
14. Third Party Administrator (TPA) Selection - Client/CPA
15. Employee Orientation - UBA/Attorney/Client
16. Ongoing Support - UBA/Attorney/TPA/CPA

The Ideal Candidate of an ESOP
Is an ESOP for you? If most of the following describes your company, the answer may be "yes".

• A Corporation ('C' Corp. or 'S' Corp.).
• Corporation has unused debt capacity (not heavily in debt).
• Corporation is profitable and can easily cash flow additional ESOP acquisition debt.
• Corporation pays taxes in the top marginal bracket.
• Corporation has been doing business successfully for at least five years.
• Corporation has payroll of at least $1,000,000.
• Business value of at lease $3,000,000.
• Corporation doing business in solid industry.
• Majority shareholder interested in sharing equity ownership with employees in order to attract, retain and reward productive employees.
• Corporation with strong secondary management capable of taking over and desiring to do so.
• Corporation or majority shareholders desirous of buying out minority shareholders on tax-deductible basis.
• Management interested in making acquisitions or purchasing capital goods on tax-deductible basis.
• Corporation wanting to refinance existing debt, resulting in the tax-deductibility of both principal and interest on the new debt.
• A corporation wanting to block a possible take-over attempt by creating a friendly voting block.
• A thinly-traded public corporation wanting to expand its stock ownership among its employees and provide an excellent employee benefit plan.
• A public corporation wanting to go private or sell off a division.

  UBA Provides Unparalleled Service and Expertise

• ESOP design and implementation.
• Strategic planning.
• Qualified valuations of ESOP companies.
• Financial consulting.
• ESOP financing and negotiations.
• Lender education.
• Project management of entire process.
• All team members required to implement a successful ESOP.
• Technical strategies to accomplish stated goals.
• Repurchase liability studies.
• Employee education on ongoing basis.
• Ongoing support (the most important of our services).

Services for Existing ESOPs
If you have an existing ESOP, and have questions, issues or problems needing attention, we are your one-stop source for help. A few of the issues with which UBA can assist you in your existing ESOP are:

• What do I do when our ESOP loan is nearing payoff and nearly all of the shares have been allocated? Where is the benefit for new employees coming on board?
• The IRS has ruled in a PLR that only contributions to unallocated shares in an 'S' Corporation, ESOP can be used to pay down acquisition debt. Our shares are fast becoming allocated. What do we do?
• Our ESOP previously acquired 49% of the company's issued and outstanding stock. We are now ready to acquire the remainder of the stock. How do we go about this transaction?
• Having Trustee problems? Call UBA!
• Circumstances have changed considerably since implementing our ESOP. For various reasons, we now want to discontinue the ESOP. How do we go about that?
• We have never had a Repurchase Liability Study or properly planned for the emerging liability emanating from the ESOP. What do we do?
• Our bank is claiming that we're breaching our loan agreement covenants due to the special ESOP accounting requirements under SOP 93-6. What do we do?
• We are now a 'C' Corporation, but have heard that it might be in our best interest to change to an 'S' Corporation for certain tax benefits. Aren't there built-in capital gains issues associated with that technique? Is this the wise thing to do?
• Does our ESOP hinder or help with regard to my personal estate planning?
• Many of our shares are now allocated. In what circumstances are our employees allowed to vote their allocated shares?

Incentive Packages for Executives
When ratable stock ownership among all employees is not enough, special executive stock packages can be designed outside the ESOP. These special stock-based incentive plans are meant to provide additional incentive to top management following the implementation of an ESOP. Our plans are designed to attract and retain exceptional talent in your company.

The Team
UBA provides all the professional Team Members and all of the services required to design and implement your successful ESOP.

• Project Manager/Consultant
• CPA
• Attorney for ESOP
• Attorney for Corporation
• Valuation Professional
• Insurance Professional
• Trustee
• Plan Administrator
• Lender
• Investment Advisor

The links on this page are Adobe .pdf files, which can be opened by the free Adobe Acrobat Reader. If you need to download the reader, please click on the button on the right. If you would like to save the file to your harddrive, click with your right mouse button on the link and select 'save target as'.

ESOPs are a powerful tool in today's world of corporate finance. Like any other sophisticated tool, ESOPs must be planned and structured properly. An ESOP is the most tax beneficial method of transferring company ownership.

• ESOP Pre-qualification Questionaire
• ESOP Due Diligence Questionnaire

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