Medical Practice Succession Planning: Unlocking Value with ESOPs

Short summary

Physician-practice owners can structure succession via ESOPs (Employee Stock Ownership Plans) instead of private equity, preserving physician governance while enabling tax-deferred growth and potential capital gains deferral under IRC Section 1042.

• •ESOPs create internal share markets using pre-tax debt repayment; ESOP-owned S-corps eliminate federal income tax on operating income
• •Section 1042 allows C-corp sellers to defer capital gains if 30%+ stock transfers to ESOP and proceeds reinvest in qualified property
• •ESOPs preserve long-term physician-led governance vs. private equity's investor oversight and typical 5-7 year exit plans

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