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How an ESOP could help businesses survive

| Dec 6, 2017 | Buying & Selling Businesses |

Many North Carolina entrepreneurs may be hesitant to plan for business succession. However, it is an important process that could prevent people from losing their jobs. Creating a succession plan may be even more important today as rough one of every two business owners are between the ages of 53 and 71.

All told, Baby Boomer small business owners employ 24.7 million people in the United States. Without a succession plan, the companies that employ these people could simply shut down if the owner dies or is otherwise unable to run the company. While some might benefit by passing ownership of a business to a younger family member, this only works about one-third of the time. It may be best for some business owners to transfer ownership of their companies to employees instead.

This is generally done using an employee stock option program (ESOP). Under such a plan, the employees are loaned money to buy the company, and the loan is repaid from revenues earned by the business. The business itself is used as collateral to secure the loan until it is paid off.

Those who are thinking about ways to protect business assets may benefit from succession planning. A solid plan could make it easier to transfer assets or determine how or when they may be sold to a new owner. An attorney can be helpful in creating business succession documents or helping an entrepreneur learn more about his or her options. When done properly, a plan may help to preserve the original owner’s legacy or make it easier to keep the business going well into the future.

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