Section 1042 of the U.S. tax code provides tax incentives to owners of businesses that sell their companies to the workers in the form of a co-op or an ESOP. Since the mid 1980s, this measure led to the creation of thousands of ESOPs, but it has been little applied to co-ops.
New research by the Ohio Employee Ownership Center suggests that Section 1042 provides new succession and retirement options to small business owners who cannot afford to convert their business to an ESOP. By selling to their workers as a co-op, the business owner can defer capital gains made from the sale of the company.
Read more about Section1042.
