January 17, 2021
by Rhonda Duffy
DUFFY Realty started in 2002. It has been highly successful launching me to the number one spot for sold residential properties four years in a row. The model works and the public loves it. Bingo! You have a winner. And then what? You want to retire and travel when your kids go to college.
So as many businesses do we started thinking about options. When we met with the Business Broker (albeit it was only one) they were not too impressive. They spoke of competitors in our books with the proper disclosures of course, but that they would likely be the buyer. That made me cringe. No way. We put that aside. I had rather close I thought.
So time passed and Frank and I were at a business seminar in August of 2015 taking notes like crazy and ESOP was mentioned. What, ESOxxx? What is that? Oh, it is an option for exit and did we mention that it makes your company tax free and that you can get your money as the selling shareholder tax free. And, it is a pension plan on steroids for your employees and makes them loyal. And that it holds better retention and production. What is this? ExxSP? I don’t know when you have had great news lately but this hit us like a bottle rocket to the brain. We were so excited about another opportunity! ESOP stands for Employee Stock Ownership Plan.
So the journey began and I want to warn you that when Rhonda and Frank get started on a mission, we ride on a rocket. We are relentless to find the best advice for the best value. We despise over paying for anything yet we know that we must find competent structure.
First we were told about a law firm that the speaker had talked to. Well we were told that they helped the speaker only to find out later after a lot of questions that that was not the truth. We were suspicious of them anyway because the fee that they were charging seemed absorbent to the point that it would take too long to break even. So in Frank and Rhonda fashion we started asking everyone we knew about this strange thing ESOP. After a few days and many calls, we found an accountant that was highly recommended to do ESOP accounting. Our accountant declined saying that it is highly specialized. After that we found an attorney that just so happened to work at the high priced law firm doing ESOPs before he joined another firm. BINGO! He charged 1/6th of the fee. YES, now we are cooking with grease.
We took the questions that we asked of the other firm and some that we made up and found that he was legit. So how long will this take? First firm said 7 months, this guy, 2 months! Wow, OK.
Next we need an Evaluation Company that can give us a value of the company. OK got that. But wait, what if we had a consultant that could help us increase our value, that could be worth something. So we hired an expert and guess what? We got 1.5 million more in the evaluation.
OK now we need a Trustee. We dug around some more and ended up using the Trustee that was recommended by the first law firm.
Now we need someone who can help with the paperwork and yearly calculations for Employees. Hired them.
I must say, I dreaded the work to do the ESOP but in hindsight the whole work of putting together the documents and facts for the ESOP as well as the continued yearly work is simply staying organized. The ESOP itself has been easy.
An, the workhorses that drive DUFFY have stayed at DUFFY to reap the rewards of the profit now and the big profit when the Owner Financed Seller note is finished.
Now to what you really want to know, yes, we have taken Millions of Dollars tax free. DUFFY does not pay corporate taxes which also makes DUFFY profitable. Frank and I still run DUFFY with the help of the vested Employees and we are on our Freedom Tour 2020 and 2021. We are paid a salary and we make the interest on the Seller Owner Financed Note.
The ESOP was the best thing we have ever done in business.
Now back to the Business Broker their suggested selling price was 40% of what our ESOP evaluation turned out to be and that was before a tax free gain!
Need help? Let’s talk. We have lived through the ESOP since October 2015 and we can get you on the right track. We have the resources and know what to do. This is a game changer for business owners.