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When an ESOP is the Right Approach to Exit Planning

When an ESOP is the Right Approach to Exit Planning

Kelly Finnell

Employee Stock Ownership Plans (ESOPs)

Employee stock ownership plans have long been an exit strategy for companies, but they are still misunderstood. Kelly Finnell shares his passion and expertise with ESOPs from his 40 years of specializing in them. Beyond the definition of an ESOP, Kelly offers his insights into the history of ESOPs, the tax benefits they present to owners and employees, what metrics a company should have for an ESOP, what companies would be poor candidates for an ESOP, and stories of the successes and challenges involved with an ESOP.

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Guest Profile

Kelly O. Finnell is one of the nation’s premier ESOP consultants, having spent more than 40 years helping business owners design and execute ESOPs. His firm, Executive Financial Services, is a national ESOP consulting firm established in 1981, with a very narrow focus on the use of Employee Stock Ownership Plans (ESOPs) in Ownership Succession Planning. They have implemented transactions in 38 cities across 19 states.

Kelly is one of the most sought-after speakers about ESOPs, with experience presenting at more than 300 conferences and meetings throughout the U.S. and abroad in London and Sydney. An accomplished writer, Kelly wrote the preeminent ESOP book, The ESOP Coach: Using ESOPS in Ownership Succession Planning, in 2010, and this work remains the most comprehensive guide to ESOPs today. Kelly has also published dozens of articles on the use of ESOPs in Ownership Succession Planning.

Kelly graduated magna cum laude from the University of Memphis and from the Cecil C. Humphreys School of Law. He earned the Accredited Investment Fiduciary- professional designation, awarded by the Center for Fiduciary Studies at the University of Pittsburgh.

Topics Covered

  • What’s the most misunderstood aspect of employee stock ownership plans (ESOPs)? [2:22]
  • What is an ESOP? [4:02]
  • Is an ESOP always an exit path? Are there situations when an ESOP is not used as an exit path? [6:22]
  • Since 1979, how have ESOPs progressed and changed over time? [10:59]
  • What are some of the variations in tax benefits for corporations that set up an ESOP? [12:35]
  • How well do professional advisors understand ESOPs? [15:24]
  • What goes into setting the value and price of the stock when establishing an ESOP? [20:25]
  • How does a business owner start the process of considering an ESOP? [21:37]
  • What is involved in a feasibility analysis to determine if an ESOP will work for a business? [23:01]
  • Who are the trustees of an ESOP, and to what extent do they understand this niche? [25:28]
  • What metrics does a company need to have in order to qualify for an ESOP? [29:15]
  • How often do employees reject the idea of participating in an ESOP? [32:10]
  • Are ESOPs unique to the United States? [34:42]
  • How often are there problems in due diligence and oversight when setting up an ESOP? [41:04]
  • What kind of business is a good candidate for an ESOP, and what are the bare minimum requirements the business needs to have? [43:57]

Learn More

Resources Mentioned

Listen to Other Episodes

Acronyms or Terms Used in This Episode

  • ESOP – employee stock ownership plan
  • ERISA – the Employee Retirement Income Security Act of 1974
  • SARs – stock appreciation rights

To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield.

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