An Employee Ownership Trust (EOT) is a trust that holds some or all of the shares of a company on behalf of the employees. An EOT ensures employees have a share in profits, a voice in governance and that the mission of the business—and its jobs—can be preserved for generations to come.
EOTs have been the favored path to employee ownership in the United Kingdom for decades. The EOT structure in the United States uses a Perpetual Purpose Trust to establish an EOT, which is an innovation of trust law that is becoming more commonplace.
With an EOT, there is no required buy-in. EOTs have lower setup costs and modest ongoing maintenance costs, but they are not eligible for the potentially significant tax benefits of an ESOP. An invaluable feature of EOTs is that they can be crafted to be protected from a future sale, with a flexible structure that can be designed to fit the specific goals of each business.
