One of the most compelling answers to the question of how a business owner can ensure that their business will remain successful after retirement is employee ownership. Transition models such as ESOPs (employee stock ownership plans) and EOTs (employee ownership trusts) are making headlines for their economic and cultural advantages. Multiple studies demonstrate that employee ownership boosts productivity, engagement, and retention. And both retiring owners and future generations of employees value the cultural benefits of preserving what makes a company a great place to work.
It’s not surprising that the enthusiasm for employee ownership models is driving legislation to support and enhance the industry. One example at the federal level is The Retire Through Ownership Act, which aims to reduce the risks of forming an ESOP by establishing a safe harbor for trustees who follow certain processes when valuing stock to be purchased by the ESOP in an ownership transition. At the state level, an example is Colorado’s Employee Ownership Tax Credit, which provides incentives of up to $40,000 for an EOT and $150,000 for an ESOP.
As demand for these powerful transition mechanisms increases, the expertise to design, implement, and sustain them must keep pace. The quote below from Matt Licina of the National Center for Employee Ownership (NCEO) makes this appeal plainly. Organizations like NCEO and thought leaders like The Stakehold (a Substack newsletter curated by Mark Hand) do their part to educate advisors and provide them with a network to share knowledge, questions, and best practices.
I’ve been part of the ESOP community for decades and have recently begun working with EOTs. Personally, my goal is to see the Venn diagram of ESOP advisors and EOT advisors show greater overlap. I’ll be at the NCEO’s upcoming Forum in Phoenix—there’s even an entire day (August 26th) devoted to a workshop on EOTs! If you see me, let’s connect. Or feel free to reach out so we can collaborate on building a stronger network of employee ownership advisors.
