Retirement Plan Services

Employee Stock Ownership Plans (ESOP)

An Employee Stock Ownership Plan (ESOP) can offer business owners a way to transition ownership while preserving the future of their company and rewarding the employees who helped build it. RMS provides ESOP consulting, plan design, and ongoing administration to help businesses evaluate their options and manage the unique requirements of employee ownership.

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What is an ESOP?

A Smarter Way to Transition Ownership

An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan that allows employees to become beneficial owners of company stock. For business owners, it’s a powerful succession planning tool that provides significant tax advantages while preserving company culture and rewarding loyal employees.

Unlike a traditional sale, an ESOP transaction allows the selling owner to receive fair market value for their shares — potentially tax-deferred or tax-free — while the company continues operating under familiar leadership.

Why it Matters

  • Preserve Your Legacy

    When you sell to your employees instead of a hedge fund or competitor, you help preserve your company, your people, and existing management.

  • Reward Your Workforce

    Employees gain a meaningful stake in the company they help build — improving retention and engagement.

  • Gain Substantial Tax Benefits

    S-Corp ESOPs have the opportunity to avoid federal income tax on the portion owned by the ESOP trust.

Key Benefits

Why Companies Choose ESOPs

  • Preserving Your Legacy

    Create a path for ownership transition while positioning your company for continued success.

  • Tax Advantages

    Capture federal and state tax savings for both the selling owner and the company once transaction is complete.

  • Employee Retention

    Ownership-minded employees stay longer, work harder, and help the company grow.

What RMS Provides

End-to-End ESOP Services

From initial feasibility through ongoing administration, our team provides the full spectrum of services required for a successful ESOP.

  • Plan Design

    We work with your advisors to structure the ESOP around your succession plans, ownership objectives, and financing priorities.

    • Ownership structure analysis
    • Vesting schedule design
    • Distribution policy planning

  • Ongoing Administration

    We manage all day-to-day recordkeeping, participant accounting, and annual reporting requirements for your ESOP — including the annual participant statements many companies turn into a share-price celebration.

    • Participant account management
    • Annual valuation coordination & participant statements
    • Signature-ready Form 5500 preparation

  • Compliance Testing

    Annual compliance testing ensures your ESOP remains an IRS-qualified plan and avoids costly penalties.

    • Coverage and participation testing
    • Section 409(p) anti-abuse testing
    • Non-discrimination testing

  • Feasibility Studies

    Before committing to an ESOP, we analyze whether the structure is the right fit for your company’s goals, whether desired contribution limits will fit within federal restrictions and determine if the company culture will fit the ownership style of an ESOP. These questions and more give owners the information they need to make an informed decision.

    • Employee benefit impact
    • Return on investment
    • Compliance considerations

  • Repurchase Obligation Studies

    Recommended every three to five years, a repurchase obligation study forecasts your future cash flow needs — so the ESOP trust can meet its distribution obligations without limiting business growth.

    • Repurchase obligation consulting
    • Study results review and analysis
    • Strategic recommendations and planning

  • Combined Plan Testing

    We have the expertise to handle both your 401(k) and ESOP, giving you a comprehensive view of your entire benefit program rather than managing each plan separately.

    • Coordinated 401(k) + ESOP administration
    • Combined plan compliance testing
    • Comprehensive plan consulting

Is This Right for You?

Who Should Consider an ESOP?

ESOPs are not one-size-fits-all. Here's how to know if your company is a strong candidate.

  • Company Profile

    • Profitable C-Corp or S-Corp
    • 40+ employees
    • Anticipated company value of $5M or more
    • Predictable cash flows and a strong management team

  • When to Consider

    • Owner planning to exit in 3-10 years
    • No obvious external buyer
    • Desire to preserve company culture
    • Interested in employee ownership

  • Advanced Strategies

    • Leveraged ESOP transactions
    • Partial or staged sales
    • Section 1042 tax deferral
    • S-Corp ESOP tax elimination

Not sure if an ESOP is the right fit?

Our consultants can walk you through all available retirement and succession plan structures to find the best match for your goals.

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RMS has been a tremendous help the entire time we have had them. We have been so blessed to have someone with the knowledge and accuracy they provide."

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Ready to explore an ESOP for your company?

Our team has guided hundreds of business owners through the ESOP process. Let's find out if it's the right path for you — no obligation, no pressure.

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