50. A founder is thinking about retiring and has no children who are interested

Question

50. A founder is thinking about retiring and has no children who are interested in taking over the family business, an agricultural products manufacturer with about 100 employees. The business is stable, profitable, and growing at a moderate rate. A team of managers has been assembled who are capable of running the business without the founder’s involvement and employee turnover is low. Which of the following “harvesting strategies” would give the founder a way to fund their retirement while also providing an incentive for managers and employees to continue to grow the business?

A: Sell the business

B Undertake an IPO

C: Establish an ESOP

D: All of the listed options are equal in their ability to accomplish the founder’s objective

Explanation / Answer

50. Answer- D. All of the listed options are equal in their ability to accomplish the founder’s objective. Selling the business or selling the stocks by undertaking IPO( Iniial public offering ) or by establishing ESOP. To set up an ESOP, you'll have to establish a trust to buy your stock. Then, each year you'll make tax-deductible contributions of company shares, cash for the ESOP to buy company shares, or both. TheESOP trust will own the stock and allocate shares to individual employee's accounts. All the above listed options have the qual ability to accomplish the founder's objective.

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