Truck Parts and Service | Heavy Duty Trucking, Aftermarket, Service Info
Issue link: http://read.dmtmag.com/i/795141
16 owners and 30 facilities in 10 states. "I think there is a real sense of pride and loyalty" for employees within an ESOP, says Klein, Inland's president. "I think it's kind of like how you feel when you rent a car or house versus when you own it. It means something to people." "You can't underestimate the impor- tance of having employees who have a vested interest in your company," adds Scott Goostree, vice president at Truck Parts & Equipment. In his case, Goostree says Truck Parts & Equipment was founded and run as a family business for its fi rst 75 years. But when its third-generation owner decided to exit the business in 2000 there were no familial successors available. Looking to make the right choice for everyone involved, the owner chose to create an ESOP. Goostree, who's been with the com- pany since before the transition, says the decision continues to pay off nearly two decades later. Employee motivation and productivity have been the biggest ben- efi ts, but Goostree says the ESOP also has all but eliminated employee turnover. "We've always been a company that's had a lot of longevity, but since the ESOP it has been incredible," he says. "The company has grown so much since the ESOP and I think that's been a huge key to it." ESOPs also feature several wonderful fi nancial selling points. For purchasers, there may be no lower-risk business acquisition in place today. Individual employees have no up- front fi nancial requirements entering an ESOP transaction. Wells Fargo says ESOPs may borrow money to purchase qualifying employer securities, and that those specifi c funds are not acquired by the actual employees but the larger group or the seller himself, who then lends the funds to the ESOP for a transaction. "An ESOP is the only tax-qualifi ed retirement plan that can be leveraged," Wells Fargo says. "The plan can borrow money from a lender [a fi nancial institu- tion, the plan sponsor, or an owner] to acquire qualifying employer securities. The plan may, for example, borrow money to buy newly-issued common stock from the company; the company then makes tax-deductible contributions to the ESOP, which are used to repay the loan." This allows the company to raise cash and deduct both the principal interest and interest payments on the ESOP loan, Wells Fargo says, and over time, "shares of stock purchased with the loan are used as collateral for the loan and are held in 'suspense.' As the loan is repaid, shares are released from suspense and allo- cated to the ESOP accounts of the plan participants." Additionally, the National Center of Employee Ownership (NCEO) adds that employees within an ESOP pay no tax on contributions to the ESOP, only the dis- tribution of their accounts, and that even then they "can roll over their distribu- tions in an IRA or other retirement plan or pay current tax on the distribution, with any gains accumulated over time taxed as capital gains. T R U C K P A R T S & S E R V I C E | M a r c h 2 0 1 7 Cover Story [ESOPs] typically have a different culture than most businesses in that they tend to be more open and professional. – Joe Bazzano, owner and COO at Beacon Exit Planning We've always been a company that's had a lot of longevity, but since the ESOP it has been incredible. The company has grown so much since the ESOP and I think that's been a huge key to it. – Scott Goostree, vice president at Truck Parts & Equipment Truck Parts & Equipment