ESOP Valuations for Employee-Owned Companies
Converting to—or maintaining—an employee-owned structure is a significant undertaking that hinges on transparent, defensible share values. Arbiter Valuation supports ESOPs and employee-owned organizations with impartial valuations that adhere to evolving regulatory guidelines.
Our approach fosters employee confidence, ensures trustee accountability, and aligns with broader corporate objectives. By delivering clarity on share price and ownership stakes using an ESOP valuation report, we help companies cultivate a culture of shared success and long-term sustainability.
Independent ESOP Valuations for Employee Trust
Employee ownership arrangements—whether structured as ESOPs or similar equity programs—thrive on clear, unbiased valuations. We apply recognized standards to determine share values that reflect current market conditions and corporate performance. This transparency helps maintain trust between employees, management, and fiduciaries.
Regulatory Compliance & Fiduciary Protection
valuations. We stay up-to-date on these regulations, providing in-depth reports that stand up to scrutiny. Our commitment to thorough documentation and consistent processes helps protect plan fiduciaries and participants alike.
Ongoing Support & Annual Updates
As market conditions and company performance evolve, so does the value of employee shares. We offer periodic updates to ensure ESOPs and related programs remain current. By tracking trends and financial milestones, organizations can proactively address changes, reinforcing a stable and transparent ownership culture.
How Does an ESOP Work?
An Employee Stock Ownership Plan works as a trust fund holding shares of a company for its employees. As the owner of the company, you issue shares or cash to purchase existing shares which gives the employee ownership stake in the company.
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The ESOP can also borrow money to buy tax-deductible shares. Employees don’t have to pay the upfront cost for the shares but they can accumulate ownership through allocations based on their pay or tenure in the company. As workers gain seniority, they vest their shares which means they’ll be able to keep them even if they leave the business.
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When they do leave or retire, they’ll receive cash for the shares at fair market value. This is why it’s so important for private companies to have an accurate ESOP valuation service to determine the value of departing employee stock.
ESOP Audit Requirements
There are different audit requirements for ESOPs and the Department of Labor requires you to fill out annual Form 5500 for plans with 100 or more participants. If you have less employees you’ll qualify for a more simple reporting method.
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Annual independent valuations are required for ESOP for private companies since there's no public market to determine share prices. These valuations must follow strict guidelines and consider your company's financial performance, market conditions, and comparable transactions. The trustee relies on these valuations to make informed decisions about share transactions and ensure participants receive fair value for their ownership stakes.
Why Sell to ESOPs?
There are many reasons why people sell to ESOPs. First, you’ll receive immediate cash while still having control of your company. The tax benefits are generous, especially for C corporation owners that can defer capital gains.
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Think of it from a workforce standpoint as well. Your employees now have a stake in the company which can improve retention and offer a financial incentive for them to work and stay with the company.
Who We Serve
Business Owners & Founders
Family-owned Businesses
Private Equity & Investment Groups
Estate Planning Attorneys
Corporate Attorneys
Wealth Advisors & Financial Planners
Accountants & Financial Advisors