Employee Stock Ownership Plan

Why an ESOP?

Employee stock ownership plans are a different type of defined contribution plan that invest primarily in employer stock. These plans provide a great way for the owners of closely held companies to transition ownership to their employees in the most tax efficient way possible, and on a schedule that is comfortable for the current owners. These plans create a high degree of loyalty, and productivity, as your employees transition into ownership.

Employees think like owners, when you incentivize them.

Most TPA firms do not offer ESOP administration as these plans are very complex and time consuming. MGKS has been servicing employee stock ownership plans for decades and we take pride in our ability to do so. If you are looking for a way to transition ownership and motivate your employees, an ESOP may be the right fit for your business.



Current employees are given ownership, which ensures the continuity of your business, while selling to a third party includes risk that the new owner could restructure or downsize those employees after the sale is complete.

Attract Employees

ESOPs give growing companies a way to compensate employees with equity rather than cash.

Tax Incentives

ESOPs provide tax incentives for the selling stockholder as well as the corporation.


ESOPs allow business owners to sell their business as quickly or as slowly as they desire which can help minimize tax liabilities.

Sample Employee Stock Ownership Plan

ESOP Book Cover

Your Options


Non-Leveraged ESOPs

Funded by contributions in cash or stock directly from the employer rather than financing through a bank. Avoids the negative impact of debt on the corporation’s financial statements.


Leveraged Issuance ESOPs

Involves the use of financing to purchase newly issues shares from the employer which are then allocated amongst participant accounts over the period of time the loan is repaid. This financing is tax deductible and used to increase working capital.


Leveraged Buy-Out ESOPs

Financing is required, and the proceeds of the loan are used to purchase stock from a retiring shareholder. This stock is then allocated amongst participants and the principal of the loan is tax deductible when repaid with ESOP contributions making the buyout of a shareholder a pre-tax transaction.


Allocation Formulas

There are many ways to allocate stock to your employees. This can be done using both safe harbor and non-safe harbor formulas and we can help show you which is more beneficial based upon your employee demographics.