• Companies completely owned by an ESOP are not subject to federal and state income taxes, in most states, if the Company has an S corporation election.
  • Shareholders who sell privately held stock to an ESOP can defer the income on the sale if the proceeds are reinvested in U.S. stocks and bonds, if the ESOP owns at least 30% of the Company after the sale, under Section 1042 of the tax code.
  • ESOPs are the only type of pension plan that can borrow money from the sponsor corporation. Contributions to ESOPs for repayment of the loans are typically structured to be tax deductible.
  • Dividends paid on stock held by ESOPs are tax deductible under Section 404(k).