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Selling to Your Employees – Employee Stock Ownership Plan (ESOP)

ESOPs are one of the most common tools used for including employees in the ownership of a company. They can also be useful in designing a succession strategy for your business. Below you will find basic information about ESOPs as well as webinars which focus on different aspects and benefits of selling your company to your employees.

What's An ESOP?

Employee Stock Ownership Plans, or ESOPs, were designed as a way to put ownership into the hands of American workers. Begun in 1974 with the passage of federal laws, ESOPs comprise an estimated 11,000 companies in the US, employing an estimated 11.5 million workers. The laws enacted to encourage employee ownership allow certain incentives for lenders, selling owners, and ESOP companies. The tax advantages of ESOPs often make them a lower-cost source of corporate financing than conventional sources.

An Employee Stock Ownership Plan, or ESOP, is a qualified benefit plan with special features. These features make ESOPs quite different from other types of retirement plans. Created in 1974 under federal law, ESOPs must meet governmental regulations issued by the Department of Labor (DOL) and the Internal Revenue Service (IRS). For more information about what an ESOP is click here

Some Facts about ESOPs:

  • An ESOP can borrow money to purchase a company or some portion of it. Other pension plans cannot borrow funds. ESOPs can also borrow funds for company expansions or capital improvements.
  • An ESOP invests primarily in employer stock, whereas regular pension plans normally diversify their investments. ESOPs can own anywhere from a fraction of 1% to 100% of a company’s stock.
  • ESOP stock is held outside the company in a separate trust. The trustee acts on behalf of, and in the best interests of, all the employee participants. Within the trust, separate accounts are maintained for the individual stockholders.

Is an ESOP right for me?

Whether you are exploring employee-ownership as a strategy for stable business succession or a tool for tax-advantaged corporate financing, you should begin by assessing your philosophical beliefs and personal comfort level with the underlying concepts of employee-ownership. If communicated effectively and coupled with participation, employee ownership can also be a powerful tool to motivate employees.  ESOPs can used as a Competitiveness Strategy; a Business Succession Plan; a Strategy for Tax-Advantaged Corporate Financing; or a Means to Avert Plant Shutdown. To learn more about whether an ESOP is right for you click here.

Video Webinars About Selling Your Business Using an ESOP

Below are webinars covering various topics important to consider when selling your business to your employees using and ESOP.  You can watch the videos by clicking on each image.

Learn more by accessing our network webinar archive  or by purchasing our publication Selling Your Business to Your Employees.

Give us a call at 330-672-3028 or send us an email to set up an initial consultation.

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