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Old 11-13-2012, 08:56 PM   #21
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Not sure if your business is quite large enough to warrant this, but an ESOP is sometimes a good solution to transitioning a business from the initial owners and on to the employees and/or other minority owners. There are potential tax benefits. And having the ESOP as a purchaser of company stock means there is a market for your ownership interest. Having a price set for your stock (or whatever your ownership interest is denominated in) could also allow the managers to buy some small ownership interest each year as their capital allows.

And in the mean time, you can compensate your employees by contributing a profit sharing match into the ESOP each year, and those funds can be used to buy your own shares from you. You slowly transition ownership to your employees this way. It also gives them ownership and buy in to the company, which means (generally) more loyalty and willingness to work toward a common corporate goal (making more money!).

It worked fairly well for a small engineering concern I used to work at. The old president wanted to retire and he has managed to offload most of his initial 60-70% interest in the company over the last 8-9 years by having the ESOP buy out small chunks of his stock each year using funds contributed to the ESOP on behalf of all employees. Those contributions to the ESOP are tax free bonuses to the employees, and fully deductible employment expenses to the corporate entity. And if your business is structured with pass through taxation (like an S-Corp), the ESOP's share of profit is non-taxed.

Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (6, 11, and 13).
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Old 11-20-2012, 08:17 PM   #22
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I would give the big thinker a loan (seed money) to open up and run a new lot, where you are a passive partner that gets a percentage of the profit. Restricting or structuring the initial amount will keep the lot small (and your risk). As this big thinker grows this second lot, you can choose the point to sell the first lot to the highest bidder. This gives you the opportunity to get out of the responsibility (and risk) and continue to get a passive income stream if Mr. Big Thinker is a success.

"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
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