ABRC-ESOP
Friday, April 25, 2008
Many Professional Advisors Won't Reccomend ESOPs
I have evidence to support the statement, “Many professional advisors without ESOP expertise will lean towards business transition alternatives that allow them to share their expertise and receive compensation for it.”
I recently met with a prospective client who shared a memo from their attorney discouraging ESOPs. After describing several “viable” exit alternatives, here is what the memo had to say about the ESOP:
“…although the ESOP is an option, it is likely not a very good option for the corporation at this time. The administrative expense and ongoing responsibility significantly outweighs the benefit to you in accomplishing your desired return. You will not only fail to achieve your desired goal…but you will likely look back and wish you had never set up the ESOP.”
I think this is a classic illustration of how business advisors approach the ESOP concept and might explain why there are still so few of them.
I recently met with a prospective client who shared a memo from their attorney discouraging ESOPs. After describing several “viable” exit alternatives, here is what the memo had to say about the ESOP:
“…although the ESOP is an option, it is likely not a very good option for the corporation at this time. The administrative expense and ongoing responsibility significantly outweighs the benefit to you in accomplishing your desired return. You will not only fail to achieve your desired goal…but you will likely look back and wish you had never set up the ESOP.”
I think this is a classic illustration of how business advisors approach the ESOP concept and might explain why there are still so few of them.
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