Employee Ownership Trusts
Ready-made succession planning, while enhancing productivity
and stimulating collaborative growth
Ready made succession planning, while enhancing productivity and stimulating collaborative growth
Knowledge Base
Where we share our
in-house expertise
directly with you
What is an Employee Ownership Trust?
The Employee Ownership Trust (EOT) first saw the light of day in 2014. It is a structure which allows the employees of a company to own most (or even all) of the shares in a company.
The EOT model offers a range of benefits to the employees, the business itself and owners who are planning succession.
An EOT provides a tax-free exit for corporate business owners and can reward employees with an annual tax-free bonus. It allows a business to retain its independence, create a positive culture and attract talent.
What are the benefits to the business owner?
The benefits to the business owner are numerous and include:
- Tax savings – There is zero capital gains tax on the money received for your company shares so long as the EOT acquires a controlling intertest in the company
- Speed – a regular business sale to a third party can take a huge amount of time. A private sale can be a very costly and complicated process and the third party may not want to move at the same speed as you do.
- Company Value – a company is valued in a similar way when setting up an EOT, but a fair market value is what you will get. You will not have a third-party chipping away at your valuation in the hope of getting a cheap deal.
- Legacy – Being able to take a step back from your business and leaving it in the capable hands of the employees that have helped you build it over the years is a strong motivational factor for all of the parties involved
Tax savings – There is zero capital gains tax on the money received for your company shares so long as the EOT acquires a controlling intertest in the company
Speed – a regular business sale to a third party can take a huge amount of time. A private sale can be a very costly and complicated process and the third party may not want to move at the same speed as you do.
Company Value – a company is valued in a similar way when setting up an EOT, but a fair market value is what you will get. You will not have a third-party chipping away at your valuation in the hope of getting a cheap deal.
- Legacy – Being able to take a step back from your business and leaving it in the capable hands of the employees that have helped you build it over the years is a strong motivational factor for all of the parties involved
Early planning will make for a smooth transaction
Friend Partnership, has many years experience in the process of EOT’s. We have helped business owners and the future trustees and employees navigate the path to a successful EOT many times.
