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From Owner Liquidity to Employee Ownership: How ESOPs Really Work From Owner Liquidity to Employee Ownership: How ESOPs Really Work From Owner Liquidity to Employee Ownership: How ESOPs Really Work
Varnum LLP  

333 Bridge Street NW
Suite 1700
Grand Rapids, MI 49504

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Tuesday, February 17, 2026 5:00 PM - 8:00 PM Eastern Standard Time

 

This presentation will offer a practical, first-principles overview of Employee Stock Ownership Plans (ESOPs), both as a qualified retirement plan and a corporate finance tool for owner succession, liquidity, and cultural continuity. It will explain how ESOPs are regulated, trustee-led arrangements that invest primarily in employer stock, and will highlight why companies consider ESOPs to achieve seller liquidity at fair market value, preserve legacy, and potentially improve productivity and retention, while unlocking significant tax efficiencies.

The presentation will also explain the mechanics of leveraged ESOP transactions, including how debt is structured and repaid with pre-tax company contributions, the role of the independent appraiser and trustee to ensure fair market value and fiduciary compliance, and the flow of shares to participants over time as loans amortize.

Finally, the presentation will touch on tax planning related to ESOPs, including Code §1042 rollover opportunities for C corporation sellers, the income-tax exemption available to S corporation ESOPs, and illustrative side-by-side examples of after-tax cash flow and proceeds.

Learning objectives:

  • Understand ESOP fundamentals: what an ESOP is, how it is regulated, and why companies use ESOPs for succession, liquidity, performance, and tax efficiency. 
  • Explain transaction mechanics: how leveraged ESOPs are structured and financed, how loans are repaid with pre‑tax dollars, and how shares are allocated to participants over time. 
  • Evaluate tax strategies: identify seller‑level §1042 rollover eligibility, company‑level S corporation ESOP tax exemptions and related limits (including §409(p)), and quantify impacts using examples. 
  • Assess valuation, fiduciary, and governance requirements: understand fair market value determinations, trustee and appraiser roles, and ongoing board–trustee governance dynamics. 

*Individuals who register as a Qualified Prospective Member must meet FEI's Membership Qualifications.


Speakers

John D Arendshorst

Partner

Varnum LLP