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Leveraged ESOPS and State Licensing

  • 1.  Leveraged ESOPS and State Licensing

    Posted 07-12-2017 07:58

    A construction company is initiating a leveraged ESOP to sell 100% of the stock, this transaction is going to create a negative equity situation due to the unearned shares.  This negative equity situation is going to exist for several years.  Many states this company does business in have a minimum working capital and/or net worth requirement for their contractor licenses.  As an example, Alabama requires $10,000 minimum working capital and net worth.  How have construction companies addressed this issue when renewing their state contractor licenses after an ESOP has been established and created negative net worth?  Is this going to be a state by state question?

    Rich Hlozek CPA
    Brown, Nelms & Co., CPAs
    Peachtree City GA
    (770) 461-5502