ESOP CANDIDATE CHECKLIST

Yes No  
Notes
___ ___

1. The company is a corporation taxed in the normal manner. Please check type of corporation.

"C" Corp. ___ "S" Corp. ___ Professional Corp. ___ Other ___.

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___ ___ 2. The company is closely held, or publicly traded with significant ownership in a few hands.

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___ ___ 3. The company has sales and payroll adequate to support an ESOP; current and projected payroll as a percentage of sales is 20% or greater.

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___ ___ 4. The company has a strong earnings or cash flow record over the previous five years.

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___ ___ 5. The company expects to pay substantial federal income taxes over the next few years.

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___ ___ 6. The company has paid substantial federal income taxes during the past three years.

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___ ___ 7. At least some stockholders have a reason why they might be interested in selling some stock; e.g., planning for retirement, liquidating an estate, entering a new business venture, children not involved in business, etc.

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___ ___ 8. If one or more principal executives will be departing in connection with the sale, there is strong management available to take their place(s).

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___ ___ 9. The company customarily makes payments to a profit sharing or other employee benefit plan that could in the future be diverted to an ESOP.

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___ ___ 10. The owners are psychologically willing to share ownership with their employees, assuming an attractive deal can be arranged. (Difficult to assess, in advance, but critical.)

|

 

No mechanical approach can be perfect, but this list is a good start. A company with six or more "Yes" answers is a good candidate. A company with eight "Yes" answers should immediately review The ESOP AlternativeTM. A company with 10 "Yes" answers is probably making a mistake if it doesn't have an ESOP.

09001894

ESOP CANDIDATE CHECKLIST
(same list with more space for notes)

Yes No  
Notes
___ ___

1. The company is a corporation taxed in the normal manner. Please check type of corporation.

"C" Corp. ___ "S" Corp. ___ Professional Corp. ___ Other ___.

|

 

 

 

___ ___ 2. The company is closely held, or publicly traded with significant ownership in a few hands.

|

 

 

 

___ ___ 3. The company has sales and payroll adequate to support an ESOP; current and projected payroll as a percentage of sales is 20% or greater.

|

 

 

 

___ ___ 4. The company has a strong earnings or cash flow record over the previous five years.

|

 

 

 

___ ___ 5. The company expects to pay substantial federal income taxes over the next few years.

|

 

 

 

___ ___ 6. The company has paid substantial federal income taxes during the past three years.

|

 

 

 

___ ___ 7. At least some stockholders have a reason why they might be interested in selling some stock; e.g., planning for retirement, liquidating an estate, entering a new business venture, children not involved in business, etc.

|

 

 

 

___ ___ 8. If one or more principal executives will be departing in connection with the sale, there is strong management available to take their place(s).

|

 

 

 

___ ___ 9. The company customarily makes payments to a profit sharing or other employee benefit plan that could in the future be diverted to an ESOP.

|

 

 

 

___ ___ 10. The owners are psychologically willing to share ownership with their employees, assuming an attractive deal can be arranged. (Difficult to assess, in advance, but critical.)

|

 

 

 

No mechanical approach can be perfect, but this list is a good start. A company with six or more "Yes" answers is a good candidate. A company with eight "Yes" answers should immediately review The ESOP AlternativeTM. A company with 10 "Yes" answers is probably making a mistake if it doesn't have an ESOP.

09001894a

 

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