Types of employee ownership

Business owners have many reasons to be proud—and many reasons to consider employee ownership. When we bring on a client, we listen closely to their goals. Not only do we ensure a fair price can be negotiated for their business, we strategize the process to meet each individual needs.

There are three main types of broad-based employee ownership, all of which have been around for many decades: Employee Stock Ownership Plans (ESOPs), worker cooperatives and Employee Ownership Trusts (EOTs).

Each employee ownership model has key characteristics. We can help you decide what will work best for your company.

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EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) WORKER-OWNED COOPERATIVE EMPLOYEE OWNERSHIP TRUST (EOT)
SUITABLE COMPANY SIZE 40+ employees,
$750K+ EBITDA
Any size Any size
TAX BENEFITS TO SELLING OWNER Can opt for $1042 deferral of gains Can opt for $1042 deferral of gains No
TAX BENEFITS TO EO BUSINESS S Corp tax avoidance Tax deduction for patronage Tax deduction for profit-sharing
SETUP AND ONGOING COSTS High Low Low
FLEXIBILITY OF MODEL Within ESOP parameters Within coop parameters Highly flexible
EMPLOYEES BUY THEIR SHARES No check No
EMPLOYEE ROLE IN STRATEGIC DECISION-MAKING Optional check Optional
PARTIAL EO TRANSITION check check check
PROFIT-SHARING BUILT IN No check check
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EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

SUITABLE COMPANY SIZE 40+ employees,
$1 million+ EBITDA
TAX BENEFITS TO SELLING OWNER Can opt for $1042 deferral of gains
TAX BENEFITS TO EO BUSINESS S Corp tax avoidance
SETUP AND ONGOING COSTS High
FLEXIBILITY OF MODEL Within ESOP parameters
EMPLOYEES BUY THEIR SHARES No
EMPLOYEE ROLE IN STRATEGIC DECISION-MAKING Optional
PARTIAL EO TRANSITION check
PROFIT-SHARING BUILT IN No

WORKER-OWNED COOPERATIVE

SUITABLE COMPANY SIZE Any size
TAX BENEFITS TO SELLING OWNER Can opt for $1042 deferral of gains
TAX BENEFITS TO EO BUSINESS Tax deduction for patronage
SETUP AND ONGOING COSTS Low
FLEXIBILITY OF MODEL Within coop parameters
EMPLOYEES BUY THEIR SHARES check
EMPLOYEE ROLE IN STRATEGIC DECISION-MAKING check
PARTIAL EO TRANSITION check
PROFIT-SHARING BUILT IN check

EMPLOYEE OWNERSHIP TRUST (EOT)

SUITABLE COMPANY SIZE Any size
TAX BENEFITS TO SELLING OWNER No
TAX BENEFITS TO EO BUSINESS Tax deduction for profit-sharing
SETUP AND ONGOING COSTS Low
FLEXIBILITY OF MODEL Highly flexible
EMPLOYEES BUY THEIR SHARES No
EMPLOYEE ROLE IN STRATEGIC DECISION-MAKING Optional
PARTIAL EO TRANSITION check
PROFIT-SHARING BUILT IN check

Interested in learn more about employee ownership?

Explore these case studies and discover what owners have to say about becoming employee-owned.

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