Employee Stock Ownership Plans, or ESOPs, are a terrific type of employee benefit plan.  They are also a way for a small business owner to cash out and exit the business — and save on taxes.  The quiz below will help answer the question “is an Employee Stock Ownership Plan right for my business?”

About Employee Stock Ownership Plans

Currently, about 6,500 companies offer ESOPs in the United States, covering over 14 million employees. About half of the companies offering ESOPs are small businesses, according to the National Center for Employee Ownership.

Under an ESOP, each employee can “earn” shares of stock and become an owner in the company. Think of an ESOP as an employee benefit plan designed to motivate and reward loyal employees. ESOPs are regulated by the Federal government as a retirement plan.

Here’s how an Employee Stock Ownership Plan works. The business sets up a trust to hold stock shares. Shares are granted to employees in trust.  Within three to six years, the shares vest. Once vested, employees are entitled to the value of their vested stock after they leave the company. The company must buy back the employee’s stock at fair market value.

About Employee Stock Ownership Plans

Currently, about 6,500 companies offer ESOPs in the United States, covering over 14 million employees. About half of the companies offering ESOPs are small businesses, according to the National Center for Employee Ownership.

Under an ESOP, each employee can “earn” shares of stock and become an owner in the company. Think of an ESOP as an employee benefit plan designed to motivate and reward loyal employees. ESOPs are regulated by the Federal government as a retirement plan.

Here’s how an Employee Stock Ownership Plan works. The business sets up a trust to hold stock shares. Shares are granted to employees in trust.  Within three to six years, the shares vest. Once vested, employees are entitled to the value of their vested stock after they leave the company. The company must buy back the employee’s stock at fair market value.

Quiz: Is an Employee Stock Ownership Plan Right for My Business?

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