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Rutgers University NJ/NY Center for Employee Ownership, with support of the Kellogg Foundation, has developed this FREE online education program to educate business advisors about employee ownership business succession strategies. One possible option is selling the business to employees using an Employee Stock Ownership Plan (ESOP).
Register below to access free course modules. Once you have registered, use the login link to return to the online learning site.
Module Descriptions
Introduction: Why Employee Ownership?
Bill Castellano, Rutgers University
Welcome to the Business Advisors ESOP Online Education Program. The technological and demographic disruptions impacting businesses are creating many challenges for business owners seeking a viable business succession strategy. One possible option is selling the business to employees using an Employee Stock Ownership Plan (ESOP).
This program is designed to help trusted business advisors be prepared to advise business owners seeking an employee buyout strategy. This introductory session will highlight why there is need for more employee ownership, some of the advantages of selling to an ESOP, the business and employee benefits of employee ownership, and an overview of the following program topics.
Legal and Tax Considerations of ESOP Transactions
Sean-Tamba Matthew, SES ESOP Strategies
This presentation provides a comprehensive overview of Employee Stock Ownership Plans (ESOPs), exploring their structure, benefits, and complexities for business owners, companies, and employees. It details how ESOPs function as both retirement plans and corporate finance tools, highlighting their advantages such as wealth creation, job retention, tax efficiency, and community impact. The presentation also addresses common myths and misconceptions about ESOPs, outlines the mechanics of both leveraged and non-leveraged ESOP transitions, and explains the tax implications and ideal candidate profiles. Attendees will gain practical insights into structuring ESOP transactions, understanding regulatory requirements, and evaluating the economic and organizational outcomes of employee ownership.
Learning Objectives
At the completion of this module, you should be able to:
- Understand what an ESOP is, including its dual role as a retirement benefit and a corporate finance tool, and recognize its key advantages for business owners, employees, and companies.
- Identify the steps and considerations involved in structuring an ESOP transition, including tax benefits, regulatory requirements, and transaction mechanics.
- Evaluate the benefits and complexities of ESOPs, dispel common myths, and determine whether an ESOP is a suitable option for a given company.
Understanding the 1042 Tax Benefit
Nick J. Francia, UBS
This session will help attendees understand the significant requirements that a business owner must fulfill before being able to take advantage of the tax deferral options offered by IRC Section 1042. We will review how an owner of a privately held business can sell a part or all of his or her business to an ESOP and consequently defer the recognition of long-term capital gains taxes from the sale.
This session will include a high-level overview of what a 1042 rollover is and the opportunities that it provides to business owners who choose to elect it. This includes its qualifications, requirements, and common investment strategies, with deeper dives into the details of each section. The session will conclude with the presentation and interactive analysis of several relevant case studies.
Learning Objectives
At the completion of this module, you should be able to:
- Understand the typical ESOP structure and what qualifications must be met to elect IRC Section 1042, including but not limited to:
- Percentage of ESOP ownership
- Stock type and origin
- Holding period
- Reinvestment window and requirements
- Tax filings
- Learn what Qualified Replacement Property entails:
- Eligible vs. non-eligible QRP
- Disposition of QRP
- What triggers capital gains tax and what doesn't
- Common diversification strategies such as:
- Passive strategy
- Active/flexible strategy
- Blended strategy
As well as the resulting portfolios and advantages and disadvantages of each strategy.
Business Valuation
Aziz El-Tahch, Stout
Selling your business to an ESOP is one of the most significant decisions a business owner will make, and the threshold question in that decision is “how much is my business worth?”. This session will help you gain a basic understanding of how the valuation of a closely held company for ESOP purposes is performed, and what the primary drivers of value are. You will hear about the purpose of an ESOP valuation, the application of the three generally accepted valuation methods, and how business owners can manage their business to enhance value.
Learning Objectives
At the completion of this module, you should be able to:
- Understand, at a high level, how a business valuation for a privately held company is performed and what the primary value drivers are.
- Learn the three general accepted business valuation approaches and the strengths and weaknesses of each.
- Better understand the non-valuation related terms of ESOP transactions that ESOP trustees and financial advisors consider in evaluating whether a transaction is fair.
Financing an ESOP Transaction
Eric Zaiman, J.P. Morgan
This session will provide a high-level introduction to ESOPs and the sale of a company’s stock to an ESOP. In particular, the session will focus on financing ESOP transactions and how senior lenders approach financing companies that will be sold – in whole or in part – to a newly formed ESOP. This session will also touch on valuation issues and discuss the mechanics commonly employed in ESOP transactions.
Learning Objectives
Upon completion of this session, you will understand:
- The benefits of executing a sale to an ESOP to selling shareholders, their employees and their companies.
- The basic mechanics of an ESOP transaction
- How ESOP transactions are financed and considerations for senior lenders in evaluating transactions
ESOP Plan Design
Joe Marx, Principal
This session provides an in-depth look at the fundamentals of Employee Stock Ownership Plan (ESOP) design and its impact on organizational and employee benefit objectives. Attendees will explore key plan provisions, eligibility requirements, allocation formulas, vesting schedules, distribution options, and compliance considerations. The discussion will emphasize practical strategies for aligning ESOP design with company goals while ensuring regulatory compliance and sustainability.
Learning Objectives
Upon completion of this session, participants will be able to:
- Explain the core components of ESOP plan design
- Evaluate how plan design choices influence company objectives and employee benefits
- Identify compliance and operational considerations for ESOP administration
Corporate Governance
Neil Brozen, Ventura Trust Company
Every corporation, whether it's owned by individuals or an Employee Stock Ownership Plan (ESOP), has a board of directors. While most of the duties of every board are the same, an ESOP board has a variety of additional duties. It also is overseen by an ESOP trustee, which is a relatively passive shareholder. This session will teach you the duties and responsibilities of the board of directors, the role of the ESOP trustee as well as how the board and trustee work together.
Learning Objectives
Upon completion of this session, you will understand:
- Corporate governance: Learn what corporate governance means as well as understand the similarities and differences in non-ESOP and ESOP corporate governance
- Board responsibilities: While most of a board’s responsibilities in a non-ESOP and ESOP company are the same, learn and understand the differences.
- ESOP trustee responsibilities: While the ESOP trustee is a passive shareholder, learn the responsibilities of a transaction and ongoing trustee
- How boards and trustees work together: Learn the many areas that boards and trustees work together.
