Episode 205: What Is An ESOP & How Does It Work? – Rea CPA

Episode 205: What Is An ESOP & How Does It Work?

Ted Lape, partner with Lazear Capital Partners, is heavily involved in ESOP formations and has helped numerous companies determine the right answer for their succession and liquidity needs. Listen to learn more about ESOPs, including what they are and what they aren’t.

At some point, if you’re a business owner, you’ll have to think about trading your business in for retirement. And when it comes to identifying an exit strategy, you can either liquidate, keep it in the family, sell it to the highest bidder, or get your employees involved. 

Ted Lape, a partner with Lazear Capital Partners, joins unsuitable to teach us more about the latter – getting your employees involved. He explains what an Employee Stock Ownership Plan (ESOP) is, what it isn’t, the benefits of starting your own, potential pitfalls, best practices, and more.

ESOPs have gained a lot of traction in recent years. Similar to a 401(k), ESOPs are defined contribution plans. However, instead of receiving Apple or IBM stocks as part of the plan, employees receive stock of the company they work for. It gives employees literal ownership over part of the company, which creates a personal vested interest in growing the company and ensuring it remains successful.

If you’re a business owner — especially if you’re starting to think about retirement — listen to this episode to learn:

  • When it makes sense to enter an ESOP — and when it doesn’t.
  • How ESOPs benefit employees.
  • Potential pitfalls and best practices associated with starting an ESOP.

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