What is an Employee Ownership trust?

An Employee Ownership Trust (EOT) is a flexible, private, simple, and low-cost legal structure that allows a company to remain employee-owned in perpetuity or for as long as desired. The company stock is held by a trustee on behalf of the employees, just as with an ESOP. The company culture should also reflect its ownership structure, just like an ESOP. However, unlike an ESOP, an EOT is not a retirement plan. Employee-owners are “naked in, naked out.” Employees do not pay for shares on the way in, and they are not bought out when they exit. Employee-owners do not accumulate shares in individual accounts. Rather, they receive a percentage of ongoing profits (or gains), in accordance with a custom-tailored formula, throughout the duration of their employment. Of course, some of these distributions may be channeled into a diversified 401(k) plan for retirement purposes. In short, the EOT offers a private transaction that provides a strong degree of flexibility for your planning needs and at a minimal cost relative to a third-party sale (or an ESOP transition).