- Where it is possible as an owner to establish an ESOP trust on behalf of the business, the ESOP can be used to transfer ownership to employees. The ESOP is essentially an independent entity operating in conjunction with your business.
If you establish an ESOP trust, that trust can borrow money from the bank. That trust can take possession and ownership of stock. The trust is then allowed to transfer ownership to the employees.
The employees then receive ownership interests as a beneﬁt of employment. The approach allows you to borrow money on behalf of the trust, have the trust buy your stock, maybe in portions over time, and it allows then that stock interest to be a beneﬁt that is transferred to employees as a beneﬁt of employment. Anyone who meets the criteria would be eligible for ownership interest.
Establishing an ESOP is a very involved process. You would want to retain professionals who are experienced in establishment of an ESOP. You also will want professionals to aid in the administration of the ESOP, which must be appropriately administered on an ongoing basis.