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Equity Compensation 101
By Gary T. Moyer, April 11, 2000
ESOP
- ESOPs are a special type of "qualified defined contribution plan" which is designed to invest primarily in securities of the Company
- The ESOP can use employer contributions to buy Company stock from its controlling shareholders
- The Company can arrange for the ESOP to borrow the fund necessary to purchase the Company’s stock, with the loan repaid with funds contributed by the Company to the ESOP
- Gain on the sale of qualified securities to the ESOP is not recognized by the shareholders of the Company who are not C corporations if those shareholders elect non-recognition treatment and buy qualified replacement property
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