COLLEGE PLANNING | ESTATE PLANNING | INSURANCE | INVESTING | PORTFOLIO SPOTLIGHT | REAL ESTATE | RETIREMENT | TAX PLANNING

Employee stock ownership plans deliver real benefits.

By Gerry Spitzer

But even if companies can be expected to carry on indefinitely, business leaders themselves are mortal. The death of a company’ s founder may force the succession issue. As would the owner’ s incapacity due to injury or illness, or perhaps their desire to pursue other interests— or maybe their spouse wants to move to a warmer climate.

Yet these owners have also likely spent a lifetime building a business. They may be feeling torn about handing over control, even if they also feel the urge to step back and enjoy the fruits of their labor.

In such cases, it’ s critical that an exit plan is put in place. That’ s where an employee stock ownership plan can come into play.

Selling Ownership, But Still Holding The Reins

These plans, also known as ESOPs, are tax-advantaged strategies allowing business owners to reward their workers with stock ownership while the owners themselves retain operational control of their companies.

The ESOP lets owners of C or S corps liquidate equity in their business while retaining governance over the operation. This is often seen as a way for company owners to ease into retirement, but they might have other agendas as well: Perhaps they want to raise funds for a new project, diversify their investment portfo- lio, use the money for philanthropy or set up a strategic estate plan( or do all these things).

Oftentimes, owners also want to reward loyal employees with a piece of their business, and giving the workforce an annual stock allocation creates an inclusive culture, giving the employees a financial stake in the operations. A residual benefit is incentivization: Employees have more reason to be at their most productive.

ESOPs certainly provide a shared economic dimension, but there’ s an equally important legacy dynamic. Owners not only get to keep their name in the window but they’ re positioned to prevent outsiders from disrupting the good that exists inside the business. People are the building blocks of a successful operation. Companies entrenched within a surrounding community may see their dedicated workers as part of an extended family. That means selling to a competitor or a private equity firm could end up in layoffs or even a relocation.

Since ESOPs allow for the control of a company to remain constant, the operation and its employees enjoy protection from the drastic changes an outright sale may bring. There’ s a legacy component to these plans, and that provides advantages for both owners and employees( and the company itself).

JULY / AUGUST 2025 | FINANCIAL ADVISOR MAGAZINE | 47