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ESOP Consulting & Administration

AAFCPAs offers a complete package for the creation, implementation, and annual maintenance of Employee Stock Ownership Plans (ESOPs).


ESOP Consulting & Administration

What Is an ESOP?

An Employee Stock Ownership Plan (ESOP) is a qualified defined contribution employee benefit plan that provides a company’s workforce with an ownership interest in the company. ESOP shares are part of employees’ remuneration for work performed, and shares are held in the ESOP trust until the employee retires or leaves the company. The shares are then either purchased by the trust from the employee for redistribution or voided.

Structure of an ESOP

To properly structure an ESOP, business owners need to first analyze the financial impact of an ESOP from both a business and personal perspective. ESOP transactions should not affect financial stability or impede corporate cash flow needs of the business, and should work within the estate planning structure of the business owner. Owners and management teams must establish an appropriate corporate governance structure on how the business will operate following the transition of the ESOP. Once designed, the company can present the structure to your lender or an ESOP trustee to establish an ESOP Trust.

Tax Benefits of an ESOP

ESOPs can be tax-advantageous to succession-minded owners, employees, and the management team. Employer corporations can deduct contributions of stock to an ESOP, deduct principal and interest on ESOP loans, and deduct reasonable cash dividends (C Corporations) on ESOP held stock to repay loans. The owners of closely-held C Corporations can defer capital gains tax on the sale of corporate stock under certain conditions. S Corporation ESOPs are not taxed on their share of corporate income. Employees participating in an ESOP are not taxed on the stock allocated to their accounts until they receive a distribution.

Economic Benefits of an ESOP

The employer corporation can increase cash flow, obtain financing, increase productivity, and motivate & attract employees by setting up an ESOP. Employees of ESOP-owned companies typically generate higher productivity rates than comparable employees of non ESOP-owned companies. The value of a company depends on its financial performance, and an ESOP ties the employee retirement benefits to the success of the Company. The objective of both the employee and employer are now the same. Typically economic incentives increase employee morale and retention rates. Employees of ESOP owned companies often feel they have more control over their own employment.


AAFCPAs provides ESOP consulting and administrative solutions for owners of commercial companies so they may deliver the best possible benefit to employees, while at the same time create sustainable and transferable value and a well-prepared & successful exit.

AAFCPAs addresses a variety of complex needs including legal consulting, financial consulting, recordkeeping, and employee communication.  We save clients time and expense by providing access to a multi-disciplinary team of consultants and advisors. Our diverse ESOP team includes: CPAs, tax strategists, business valuation accredited professionals, auditors of pension plans, pension plan advisors, wealth advisors, and managed accounting solutions.

Our integrative ESOP Consulting & Administration solutions include:


  • ESOP feasibility and cost study, including interviews with management, founders and board members to determine if an ESOP is appropriate and will fulfill the objectives of the principals of the company
  • Integration with owners’ and/or executives’ personal tax situations
  • Tax optimization planning
  • Plan design consulting


  • Production of documents creating the plan and the related trust
  • Plan distribution paperwork
  • Generation of appropriate ledgers and paperwork for the trust
  • Initial & annual business valuation in compliance with IRS and DOL regulations


  • Communication & regular meetings with trustees of the plan, as needed:
    • Overview of plan records, including: employee census reports, participant allocation reports, Form 5500 filing with IRS, plan & trust documents, and amendments
    • Notifications to participants
    • Guidance on ESOP tax incentives and contribution limits, vesting, distribution and diversification rules
  • Education and participant communication services, including:
    • Required IRS & DOL notices
    • Eligibility information, and consent, election & beneficiary designation forms
    • Guidance regarding diversification options and alternatives
    • ESOP account values
    • Distribution information, including notification of when participants are entitled to a distribution of their vested account balance
    • Processing of elections or changes to information such as contact information or beneficiaries
    • Issuance of plan summary and annual report to each plan participant
    • Available to answer participant questions as needed
  • Withholding of federal and state income taxes on plan distributions where necessary, and filing of necessary tax returns
  • Assistance with ERISA compliance requirements, including preparation and filing of required IRS Forms 5500, 1099, 1096, and serving as a resource to plan auditors as needed
  • Maintenance and preservation of required administration records to maintain compliance and access as needed

AAFCPAs has been providing ESOP consulting and administration services for over 40 years for commercial business owners interested in using employee ownership as a tax-efficient strategy for business succession planning.

We encourage you to speak directly with our clients who will attest to our exceptional value because of our high ethics, personalized attention, and business tax expertise.