Stock Ownership

[mlp0816]

If you own 5% of the company's oustanding stock, are you considered a 5% shareholder?

[Guest tmills]

Technically no. See 416(i)(1)(B) which states that a 5% owner is one who owns more than 5%. Therefore, if the individual owns exactly 5%, not 5.0001%, they should not be a 5% owner. As always, counsel should be consulted.

[A Shot in the Dark]

MLP:

Are you asking the following question:

If a participant has allocated shares to his/her account within the ESOP that represents more than 5% of the outstanding shares of stock would they be considered a 5% shareholder?

[mlp0816]

Shot in the Dark.... yes that is what I'm asking.

I have one participant who owns exactly 5% of the outstanding stock of the company. And I have one that owns more than 5.1% of the outstanding stock. Are they both considered 5% shareholders?

[A Shot in the Dark]

MLP:

In short, IRC Section 318 and 1563, the sections that relate to constructive ownership specifically exlculde stock held by a trust related to a qualified retirement plan.

I presume your employee stock ownership plan is qualified.

Thus, the stock ownership is not counted when determining key employee, highly compensated, etc.