How ESOPs Work
Own the Success You Help Create
Employee Stock Ownership Plans (ESOPs) are a widely adopted option for promoting employee ownership in the United States. The National Center for Employee Ownership (NCEO) estimates roughly 6,500 ESOPs covering almost 14 million participants. These numbers represent businesses across industries, including manufacturing, construction, and professional services. Companies that adopt ESOPs are often privately held, although some publicly traded companies use ESOPs.
Who Funds an ESOP
The employer funds the ESOP with tax-deductible contributions to purchase company shares. It operates through a trust under the direction of a trustee or another named fiduciary. An ESOP must comply with the requirements set forth by the Internal Revenue Service (IRS).
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