Alliance Benefit Group of Michigan

30100 Telegraph Road, Suite 170, Bingham Farms, Michigan 48025 | Ph: 248-540-5300 | Fax: 248-540-5318

Employee Stock Ownership Plan

An Employee Stock Ownership Plan (ESOP) is a defined contribution plan which makes the employees owners of the company. As owners, employees may be more motivated to improve corporate performance because they can benefit directly from company profitability. The primary investment of the ESOP must be company stock, although most plans will also include a cash fund for transactions.

An ESOP may be leveraged, allowing the employer to borrow money and pledging shares of employer stock into a suspense account to be released as the loan is repaid. In a non-leveraged ESOP, contributions are made in shares of stock or to purchase shares of company stock.

ESOP’s are utilized by employers seeking a source of capital while providing employees with a personal stake in the performance of the company.

Alliance Benefit Group, its subsidiaries, and all employees thereof, are not engaged in the practice of rendering legal services, accounting or other professional advice. Although care has been taken to provide accurate guidance, the preparer of this communication disclaims any implied or actual warranties as to the accuracy of any material herein and all liability with respect thereto.

IRS CIRCULAR 230 DISCLOSURE: As stated above, Alliance Benefit Group does not provide tax advice. To the extent this communication (including attachments), mentions or discusses any tax matter, it is not intended or written to be used, and cannot be used by the recipient or any other person, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party the matter addressed herein. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.