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Subchapter S Corporations, ESOPs, and Employee Ownership
National Center for Employee Ownership [NCEO] Link to more items from this source
Oct. 13, 1997

"If an 'S' corporation sets up an ESOP, once it actually buys shares, the 'S' corporation automatically becomes a 'C' corporation (it can, however, safely make cash contributions for one or two years to the ESOP without losing its 'S' status). The benefits of selling to an ESOP include the ability of the company to borrow money thorough the plan, to deduct contributions to the plan used to buy out the owner, and the ability of the owner to defer tax on the gain from the sale. Why would an owner of an 'S' corporation not want to do this?"

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