Navigating Business Owner Succession & Transition Options

Can you sell your business, and still own it? Call us!

Growth Strategies - ESOP Advisory - Valuations - Business Brokerage - Financing - Tax Planning - Risk Management

Transition Planning

Succession, retirement or growth planning; Cash Option, ESOP, 401(k), Brokerage, M&A. Which ones are best for you?

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Valuation / Feasibility

For about $5,000, perform a preliminary feasibility study of the company. A valuation report will be provided and reviewed.

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Project Management

Determine, negotiate, invoice & oversee all professional services. We report on progress and costs. You focus on growing your business!

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Tax Planning

Navigate best course for sale, capital gain to owner and/or family transfer and other regulatory related tax strategies. Take advantage of significant tax savings

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Risk Management

Risk is present in any business transaction; culture, management, liquidity & life. We will discuss the risks to ensure you are protected and comfortable.

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Debt & Equity Financing

Multiple sources: bank debt, seller debt, company cash, 401(k) lateral transfer, commercial subordinated debt, etc. Which is the right combination?

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Business Brokerage / M & A

Sell, buy, merge or transfer your business. Studies show you need to start planning five years out to prepare. If you aren't prepared, you are not alone.

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Trustees often look to other professionals to leverage their business development. We welcome partnerships with sustainable, and reputable professionals who can represent our clients. If there is a need for an owner to have a sell-side consultant, we can streamline and project manage the transaction.

Legal Counsel

Whether representing the sell or buy side, often law firms take on the role of project manager. This either requires an allocation of resources, like attorneys, or hiring a person that increases fixed costs. Smaller law firms may not be able to compete with larger firms that have internal client and project management skills. Outsource the project management to Pathfinder USA. Call us to discuss.

CPA / Valuation

We always start an engagement that requires a valuation/feasibility study. Because we can represent either the sell or buy side, we usually seek the aid of a CPA firm. We also get calls to engage in acquisition of CPA firms by partners looking to grow. If your firm or your clients are looking to acquire or sell and they aren't familiar with the options. Call us!

RIA /Financial Advisors

Experienced advisors have an in-depth knowledge of the traditional ownership succession planning paths such as a sale to a strategic buyer, a sale to a private equity group, making lifetime gifts of ownership interests to family members, and a management buy-out, but few have much experience using an Employee Stock Ownership Plan (ESOP) in exit planning. Call us.

About image
Pathfinder-USA specializes in business owner transitions. These might be selling their business to retire, merge or acquire another business or transfer the business to a family member, management team or employees In the case of employee ownership, we can show you how you can sell your business and still own it.  ESOP is only one option for any of these transitions, but it does provide the most benefits:
  • Tax-efficiently unlock liquidity in a highly successful business;
  • Maintain ownership and control; and
  • Reward employees for helping to build it into what it is today
We approach every client's initiative with a team approach during the assessment and feasibility stage. Our team have extensive experiences in :

Private Equity
Debt Financing
Risk Management
Financial Planning
Fiduciary Services
Financial Analysis
Growth Strategies
Merger Integration
M &A
Tax Planning
Business Brokerage

Pathfinder USA Consultants (PUC) is your guide and personal project manager to navigate a complex matrix of service providers, regulatory requirements, and tax issues. We bring to our team experienced, vetted and trusted specialists in trust & administration services, investment banking, ESOP Plan advisory, valuation/feasibility and financing to support the growth and ownership transition strategies of small to middle-market companies. We work for you, do all the heavy lifting so you can focus on your core business.

For over 30 years, our professionals have been helping guide hundreds of small and middle market business owners in various segments of industries in the US and Canada. Through either our internal expertise, or access to professional in specific areas, we can bring you a seamless integration of an ESOP, cash managed plan, 401(k) plan, an acquisition of another business or sale of your business.

We pride ourselves in being conscious of costs and will always represent your best interest in all our endeavors. Because we have no ties to specific service providers, we will match you with the best fit, both from a capabilities, size and complexity standpoint. We are independent and small business owners, just like you.

Our mission is to provide clients with outstanding independent advice and task organized service, that helps them meet their objectives and accomplish your goals, all while allowing them to never lose focus on running your business.

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An Employee Stock Ownership Plan (ESOP) is a tax qualified retirement plan authorized and encouraged by federal tax and pension laws. Unlike most retirement plans, ESOPs: • Are required by law to invest primarily in the shares of stock of the sponsoring employer. • Are trusts that hold shares of the business for employees, making them beneficial owners of the company that employs them. • Can provide tax benefits to the company and to the exiting owner(s). • Can borrow money from related parties to finance company projects—including the tax-advantaged purchase of the company’s shares of stock.
 Companies have used ESOPs as a way to finance a variety of efforts, including business expansion, management buyout, acquiring a target company, spinning off a division, and taking a company private. In limited circumstances, ESOPs have been used to finance the buy-out of a firm or company division that otherwise would have closed. 
Under federal tax law, owners of closely held companies can defer and possibly avoid tax on the gains made when selling stock to an ESOP—when the following conditions are met: 1. The ESOP company is a C corporation at the time of the sale. 2. The ESOP owns at least 30 percent of the company immediately after the sale. (The sale of stock by two or more shareholders counts toward this 30 percent requirement). 3. The sale proceeds are re-invested in U.S. domestic corporation stocks and bonds within a set time period. To qualify, reinvestments must be made within a 15-month window that starts three months before the date of sale and ends 12 months after the date of the sale to the ESOP. This “tax free rollover”—which is included in the federal tax laws to encourage the establishment of ESOPs—can be very attractive to retiring owners and shareholders of closely held companies
Yes. S corporations that sponsor an ESOP are eligible for a different tax incentive: The portion of the business owned by the ESOP trust is exempt from federal (and often state) income tax. What is an ESOP? By The ESOP Association The ESOP Association 1200 18th Street N.W. Washington, D.C. 20036 (202) 293-2971 | © All Rights Reserved The ESOP Association, 2018 | 1 If 60 percent of an S corporation is owned by the ESOP, the business would avoid taxes on 60 percent of its income. A 100 percent ESOP-owned S corporation operates essentially free of income tax.

Additionally, companies have used ESOPs as a way to finance a variety of efforts, including business expansion, management buyout, acquiring a target company, spinning off a division, and taking a company private. In limited circumstances, ESOPs have been used to finance the buy-out of a firm or company division that otherwise would have closed. 
In addition to the financial and tax incentives, most companies establishing an ESOP have a keen desire to provide an employee ownership incentive and benefit. In fact, for some companies, the ownership and benefit incentive is the primary reason for the ESOP. Research has shown that giving workers a significant stake in the company that employs them improves employee attitudes toward the company, and these improved attitudes translate into improvement of the company’s bottom line. Companies may well find the added productivity resulting from employee ownership in the company makes the ESOP the best choice. 
In a leveraged ESOP, the ESOP or its corporate sponsor borrows money from a bank or other qualified lender, and uses the loan proceeds to buy shares from current owners or the company. If the ESOP is the borrower, the company guarantees the loan. As part of the guarantee, the company agrees that it will make contributions to the ESOP that will enable the ESOP to pay back the loan on schedule. If the borrower is the company—which is the arrangement preferred by many lenders—the company lends the funds from the loan to the ESOP so the ESOP can buy the shares.

If the leveraging is meant to provide new capital for company expansion or improvements, the ESOP will use the cash to buy newly issued shares of stock from the company. If the leveraging is used to buy shares of stock from a shareholder, the ESOP generally will acquire those existing shares directly. If the leveraging is being used to divest a division of the company, the ESOP will buy the shares of a newly created shell company, which in turn will purchase the division and its assets.

Two tax incentives make leveraged ESOP financing very attractive. First, contributions to an ESOP are tax deductible so that: • The company makes contributions to its ESOP. • The ESOP in turn pays those contribution dollars back to the company to pay down its loan from the company. • The company then uses those contribution dollars to pay down its loan from the bank or other lender. In effect, the company gets to fully deduct the loan’s principal and interest (not just the interest, as is the case for non-ESOP loans). By reducing the number of post-tax dollars needed to repay the loan principal, a company’s cost of financing can be cut significantly. Second, dividends paid on shares of a C corporation held in an ESOP are tax deductible if they are used in any of the following ways:
• To repay the ESOP loan.
• Passed through to employees.
• Reinvested by employees for more company stock.

This provision of the federal tax law well may increase the amount of cash available to a company, compared to one utilizing conventional financing. 
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