Employee Stock Ownership Plans (ESOPs) are popular both with owners looking for ways to increase employee engagement and involvement and with employees seeking to have some ownership in and benefit from the work they do beyond their salaries. For business owners, considering implementing an ESOP is one of many options they consider when looking at retirement, but there are other reasons to consider ESOPs.

Provide Benefit for Employees

Whether the goal is to let long-term employees benefit from the profits of the company or trying to protect employees by providing security, ESOPs are often a way to provide employees with an extra benefit. In addition to health and other retirement and disability benefits a company might provide, an ESOP doubles as both investment and a morale boost, giving employees a chance to be part of the action. Some employers hope that, by giving their team “skin in the game,” it will encourage them to think like owners, looking for ways to boost profits, cut costs, and keep the company running smoothly.

Exit Strategy

One reason owners start thinking about ESOPs is that they make an excellent exit strategy, allowing an owner to control and time their exit, choose their successor, and stay involved with the company if desired. The ESOP can buy out the owner’s stock over time, providing an on-going income stream to a retiring owner. Further, the owner can structure the terms of the deal, within reasonable parameters, making it attractive to their retirement and personal goals.

Creating a Legacy

For some owners, giving their top, long term employees ownership in the company is a way to both cement their legacy and help their team create their legacies. An owner who wants to be remembered as generous, someone who cares for their employees, may choose to create an ESOP to hand the company over to those who have worked so hard to build the business.

Align with Company Values

Companies whose mission involves employee-centered goals often consider ESOPs to align what they are doing in the company with what their stated goals are. For some companies that want to provide for the employees, giving them a chance to own the company and share in the profits help them both care for those individuals and incentivize their performance. There are many stories of companies that set up ESOPs early on in their growth and did initial stock distributions to team members. Those same team members remained employed and, over time, became quite wealthy as the company’s value grew.

An ESOP is a type of benefit plan and needs to be structured with care. The experienced attorneys at Hall Benefits Law have helped clients structure their plans to meet multiple goals, both personal and company-wide. Call 678-439-6236 today or visit the Hall Benefits Law website to learn more.

Source: Lexology