Journey to an ESOP & Beyond

Journey to an ESOP and Beyond continues to bring perspectives that can challenge conventional thinking and at the least provide the listener with questions for their advisors.  Jeff Forrestall, CPA provides a good overview of the changes in SBA ESOP financing as well as a compelling forward planning model to leverage the C Corp opportunity beyond 1042.

This episode takes advantage of the classic film “Meet Joe Black” starring Brad Pitt and Anthony Hopkins. The podcast uses the movie to demonstrate the two guarantees in life - Death and Taxes.  The nuances of taxes can catch individuals by surprise.  As it relates to an ESOP transaction - most of the time there is a resulting seller note established.  Relative to an S-corp sale - there will be capital gains taxes that need to be estimated.  We usually look to installment sale method but if a company’s transaction is large enough to create a seller note greater than $5 million there will be an additional IRS interest cost known as 453a.  We detail this issue so that listeners do not underestimate the additional cash outflow to the sellers.   This is a very important step in your personal  Journey to an ESOP!

This is the first episode of the new year where we like to cover changes to the podcast.  This kick off message for season 6 focuses on our core value: “It Takes A Team”. This works out well to connect the dots on the old tv show and 2010 movie “The A - Team”.  Some of the changes to the podcast have already been incorporated in our logo change.  This episode covers some of the highlights of 2024.  Looking forward to the new year for 2025 and some of the areas we plan to focus on as well as the open invitation to send your questions to our contact us page on the Journeytoanesop.com website.  Lets get started on our next step on this journey to an ESOP.

In this episode, Noelle Montano returns to discuss ESCA’s tireless efforts to preserve and promote the S-Corporation ESOP in Washington after the 2024 election. We also discuss some of the impacts employee ownership has on companies, communities, and Congress.

Every company has its own lessons to be learned in the journey of converting to an ESOP. This interview with Kevin MacRitchie, CEO and Karen Lyons, CFO of Tactical Rehab provides key leadership perspective on the transition of this company through the process of becoming an ESOP.  Kevin has a large company background and has brought a level of management that is moving their company to the next level.  As part of his strategic leadership, he has fostered a vital partnership with the employees of Tactical Rehab, Inc. and even a greater level of trust with his CFO - Karen Lyons.  Karen brings an order to the company to provide financial insight with not only important data points, but also to support the well thought out strategic direction of the company.  Both Kevin and Karen speak to the importance of teamwork in the success of building the company.  The ESOP was considered and moved into a reality as an essential tool working through many common objectives that most companies have:  succession, culture, retention, incentive.  They have embraced a full on ESOP communication strategy for their employees on a monthly basis in addition to other key initiatives.  

This episode highlights the leadership issue a business finds itself continually facing.  Ongoing leadership development is a common concern with most companies both before, during, and after the ESOP transition. Going through the feeling of being “Alone Again” is a natural and normal issue that needs to be addressed whether it be for management succession in the short run or for the company’s final exit plan. 

This episode addresses effort the challenges and applicable solutions for a mature ESOP company. Diana Clark and Jason Miller provide insight into including preservation of ESOP knowledge in the organization contemplating changes to leadership.  Other items we discuss include how to look ahead at areas that need to be thought about not only as a mature ESOP but also preparing ahead of time for these issues.  The discussion includes best practices that should be thought about post ESOP issues.  ESOP companies should be focused on the long-term sustainability as companies build out infrastructure the can produce solid results like employee engagement.  Ultimately, it takes work and ongoing focus to stay on top of this just like other areas of the business. 

This episode was inspired by the recent NCEO conference and provides a good overview for those that are new to an ESOP or those who have recently transitioned to an ESOP. The podcast discusses the need to build the employee-ownership concept as a vibrant part of the culture of your company.  As we go through some of these concepts, we will address the audience, frequency, repetition, and plan for ESOP communication.  This can affect each employee-owned company differently depending on where the company is in their development whether that be a new, young, maturing, or mature ESOP.

Agnes Gregory, a Tax Partner specializing in estate tax at Berman Hopkins CPA, and Justin Stemple, an ESOP attorney with decades of experience at Warner Norcross + Judd, dive deep into estate planning for ESOP transactions. They discuss the urgency of creating an Estate/Gift Tax plan amidst potential estate tax changes. Key topics include the significance of strategic gifting, trusts, and the need for professional guidance to avoid probate issues. They emphasize proactive collaboration with advisors for a smoother business transition and optimized asset management.

This episode highlights ESOP advisors you may run into at the conferences (or really anywhere!)  The topic is to help provide an overview of the ranging roles as it applies to ESOP advisory and how to choose advisors who can best support your personal journey to an ESOP.