An employee stock ownership plan (ESOP) is a qualified retirement plan that invests primarily in the employer company’s stock. For C-corporation owners, selling to an ESOP can trigger a Section 1042 rollover, which defers capital gains tax when you reinvest proceeds in qualified replacement property. ESOPs help preserve company culture, reward employees, and provide seller liquidity with tax deferral. The trade-offs include employer-stock concentration for employees, borrowing risk if the ESOP is leveraged, and ongoing compliance costs. If you are considering an ESOP as an exit strategy, a wealth advisor can help you evaluate whether it aligns with your financial and legacy goals.
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