This is a common method to pay off or buy out an owners shares in a private company held through an ESOP plan. By law, the employees have to be allowed to vote on divesture and all vested employees would have to be paid off if the company were sold to a competitor. In this case, the owner will be paid for his shares either by future company profits or by loan proceeds obtained against the ESOP, which ever is the case the payments and interest are all tax deductible to the company. The employees incur no additional tax liabilitie because as plan participants they are already owners, they will pay tax on the gains above distribution at the capital gains rate at retirement or roll their proceeds over into IRA's, the usual penaties apply if proceeds are taken out early. ESOPS are the way to go for privately held, non partnered companies.
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Today's Featured Article - A Lifetime of Farm Machinery - by Joe Michaels. I am a mechanical engineer by profession, specializing in powerplant work. I worked as a machinist and engine erector, with time spent overseas. I have always had a love for machinery, and an appreciation for farming and farm machinery. I was born and raised in Brooklyn, New York. Not a place one would associate with farms or farm machinery. I credit my parents for instilling a lot of good values, a respect for learning, a knowledge of various skills and a little knowledge of farming in me, amo
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