Can an Employee Stock Ownership Program (“ESOP”) work for you?

As a small business owner, you may have considered selling your business to a competitor or shopped it via a business broker.  One option you might wish to consider is selling it to your employees via an Employee Stock Ownership Plan (“ESOP”).  While every idea has pros & cons, for the business owner an ESOP allows them to sell the company over time rather than all at once – allowing them to remain in control while the company transitions.  Additionally, if the owner sells at least 30% of the company to the ESOP, they can defer capital gains taxes on the proceeds while they remain invested in another company.   From the employee standpoint, this is a retirement benefit and can engender greater employee involvement, retention and motivation. 

These types of plans don’t work for all industries or situations so you will want to talk to both your tax advisor and business consultant.  However, it can be a great tool to allow the owner to transition to the next phase while protecting and rewarding the employees who helped you succeed.