(PRWEB) July 26, 2005
(PRWEB) July 27, 2005 Â American Business Resource Corporation president Evan Rhodes has a formidable challenge Â helping small businesses stay in business.
The U.S. Small Business Administration, Office of Advocacy, states that the average small business lifecycle in the U.S. is less than 12.5 years. Collapse or abandonment often comes because business owners are unable to cope with the business challenges of growth, they have an unclear exit strategy, or they mishandle their taxes.
Rhodes says, "In my 20 years as a management consultant, business owners' problems have consistently revolved around three main issues: growth, exit and taxes."
This observation led Rhodes to create a program to help small-business owners deal with growth, exit and taxes (G.E.T.). The G.E.T. Program uses Employee Stock Ownership Plans (ESOPs) as a corporate financial strategy for S-Corporations. The Employee Stock Ownership Plan for S-Corporations is a government subsidy program that has been in place for nearly seven years.
In 1998, Congress took steps to radically reform ESOPs: they decided to include S-Corporations as a type of company that could be sold to an ESOP. Additionally, they provided that if the business was sold to an ESOP, the company would be exempt from all income tax on its profits. The money the owner used to pay in taxes could now be used to partially or fully fund the sale of the business to the ESOP. Not only does this create a market for smaller companies, it also funds the transaction through tax savings and provides retirement benefits to employees.
Despite the many advantages of installing an ESOP, only about 1,500 of the eligible 5.6 million small businesses nationwide have used it. Why is this? Rhodes offers three reasons: 1) A lack of understanding on the part of financial advisors about ESOPs; 2) Confusion regarding the older C-Corporation version of the ESOP Â- which is generally less attractive, and 3) Lack of proactive exit planning on the part of business owners.
Why is the government encouraging ESOPs for small businesses? Rhodes says, "The logic is quite simple: the more businesses stay open, the more employees there are to pay taxes and thus create much needed revenue for the government."
In the next 10 to 15 years, 76 million baby-boomers will be retiring. Exploding numbers of baby-boomer business owners will soon be divesting themselves of their businesses. Business owners who plan to retire in the next decade would be wise to create a competitive advantage in a buyers' market. They can begin by exploring ESOP as a succession or exit strategy to help ensure their business lives on and they receive full value for their company.
About American Business Resource Corporation:
American Business Resource Corporation designs, installs and maintains Employee Stock Ownership Plans (ESOPs) for S-Corporations. For additional information, visit http://www.abrc-esop.com, call (480) 556-9928.