How to Transfer Your Company to Employees with an ESOP
According to the National Center for Employee Ownership, there were about 7,000 employee stock ownership plans covering about 14 million employees in 2017.
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.