Selling to an ESOP vs. Selling to a Third Party

Using an ESOP for business transition can be complicated, but selling to an outside buyer is often uncertain and even more complicated, with less flexibility and fewer tax benefits. This infographic compares these alternatives side-by-side. For example, a sale to a third party offers no special tax benefits, whereas a seller to a C corporation ESOP can indefinitely defer taxation, and ESOP-owned S corporations have no tax bills to fund. And outside buyers usually want to buy everything and all at once, whereas an ESOP can buy any amount and can buy gradually over time, allowing the owner(s) to gradually transition.