INCENTIVE PLANS

Incentive Plans

Incentive Plans

Employee stock ownership plan

There are number of companies which apply ESOP for more than total of 30%. Those companies which apply this rule are said to be the C corporations and the rest are known as the S corporations. If the company uses Employee stock ownership plans, it is said to grow faster than those companies who do not apply Employee stock ownership plans. The companies are said to grow at a rate approximately 3% more than the normal. This helps the company to perform better at any circumstances and lead to higher earnings. This whole process can eventually help in earning more profits. The statistics also prove that the companies who use Employee stock ownership plans tend to have better performance measures and can have highly motivated employees at work. All these can again result in better performance. But the overall performance should not be confused by participation plan.

An Employee stock ownership plans is one of several qualified employee retirement plans that is available to employees. The key difference is that they are set up to invest in the company versus in someone else. The hopes of it are that if your employees are invested into the company, they will want to boost revenues for their own benefit as well. It's a win-win situation. The main advantage of an Employee stock ownership plans is that it allows an owner to sell company shares to employees; in return, it is reinvested in a portfolio, which allows the employee as an owner to retain control of the business. Most importantly, it can allow the employee to avoid taxes indefinitely (John Wei-Shan & Chun-Hsiang, 2006). Through the Employee stock ownership plans, there is the option to provide a tax-saving exit for the employee as an owner. Employee stock ownership planss are designed to invest mainly in the stock of the sponsoring employer. A newly formed Employee stock ownership plans can borrow money from the corporation or a commercial lender. For tax purposes, the Employee stock ownership plans must retain at least 30 percent of the company stock.

Over time, the contributions made to the plan will pay both the principal and interest on the loans. Since the contributions are deductible, the company is able to deduct both principal and interest. This is an advantage to the company. More importantly, the owner can elect to defer the federal income tax ...