How to Transfer Your Company to Employees with an ESOP
Other business owners use ESOPs as a supplemental employee benefit plan for employees or to borrow tax-advantaged money. Closely held companies sponsor the vast majority of these plans, while public companies sponsor only 3% of them.
Typically, employee equity builds gradually through an ESOP. Although business owners may use an ESOP as a long-term way to transfer business, it may also serve as a short-term vehicle to buy out a partner’s shares. And because owners are also employees, they enjoy the same tax advantages of a qualified defined contribution retirement plan as their employees.