employee benefit Tag

11 Dec Own Stock in an ESOP? You Could Be Lender!

Employee Stock Ownership Plans are popular at many larger public companies. One reason is because employees will have a stake in their company and want it to succeed. But another reason is that it helps get cheaper loans. A large company borrowing money directly from a bank can deduct the interest on a loan from its taxes. If it "launders" the loan through an ESOP, then it not only gets to deduct the interest but also the principal payment! If the corporation is in the 34% tax bracket, that's means a hefty savings that may (if the rates are very low) work out to a free loan. Great for the company, not necessarily so great for the employees.
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