Employee Benefits Law Blog
The short answer is YES! Here’s the plain‑English, straightforward version of how an ESOP works as a succession strategy:
1. The company sets up an ESOP trust.
2. That trust then buys some or all the owner’s stock.
3. Employees earn shares over time as a retirement benefit.
4. The company keeps operating - same management, same board.
5. Finally, instead of having to sell the business to a competitor, or shutting the doors completely, the owner ultimately sells to the people who helped build the business.
Sounds great, so what’s the catch? There is fine print and I wouldn’t be ...
You can probably picture it now: some employees are chatting and out of nowhere, someone blurts that out. Most employers would immediately tense up. Maybe HR gets a phone call, and everyone is now in damage control mode.
But that’s not what happened at one of my ESOP (Employee Stock Ownership Plan) companies. In fact, the company president later said it was one of the best things that could have happened and here’s why.
The comment came up when a retired employee stopped by to attend the company’s annual share release party. ESOP statements were handed out, and as the retiree looked ...
