An ESOP is a type of qualified pension plan that can borrow money to buy stock in a corporation.

The sale of stock to an ESOP can be tax deferred forever, and if all the stock is owned by an ESOP, the company can be exempt from federal income taxes, and (in virtually all states) all state income taxes. After the sale to an ESOP, the business owner can remain in control of the business, subject to the rules under ERISA.

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