When you think about it, there is very little benefit to traveling by corporate jet unless you can land it. All the magnificence, power and prestige of traveling from point A to point B pale in comparison to the very practical challenge of navigating to point B (and, hopefully, not some unknown direction) and then safely landing. Because of the obvious importance of plotting a route and safely landing at the chosen destination, a great deal of thought, training and planning go into the process. Every time the corporate jet takes off, someone has set a very specific goal, and most certainly intends to achieve it.
Why, then, not the same with business owners? Over the past thirty years of dealing with private businesses, I have found an amazing lack of specific planning with regard to landing the corporate jet, defined as disposing of the corporate asset in such a way as to liquidate the founder's investment in a tax-advantaged way. After all, why are we in business if not to create a marketable asset?
There are, to be sure, several ways to effectively land the corporate jet. But, there is one method so powerful and creative that it stands out from all the others as being profound and unique. What is that method? It is an employee buyout through an Employee Stock Ownership Plan (ESOP). An ESOP is a powerful tool which, when properly employed, can provide the following benefits:
- When selling his stock to an ESOP, the founder can avoid paying tax on the transaction. ZERO TAX!
- If a loan is employed to pay for the founder's stock, the company can deduct the PRINCIPAL on the loan as well as the interest. Creates cash flow!
- The founder/seller receives top dollar for his stock and controls the sales process.
- The founder/seller can, if desired, remain in control of the business following his buyout.
Business owners can actually obtain a 68% tax subsidy for selling their businesses to a captive ESOP. Now that's what I call landing the corporate jet.
Long Version >>
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