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Employee stock ownership plans can help to prepare owners for an exit as well as reward employees. Is it the right fit for your company at this time? As a business owner, you may be concerned with the amount of your net worth that’s tied up in your business. If it represents a large percentage of your overall wealth, you may be considering how to transfer it to the next generation and, at the same time, you may be wondering what other tools you could employ to attract and retain employees.

An ESOP is a tax-advantaged defined contribution plan in which employees own shares through a trust that the company funds. As of 2022, the National Center for Employee Ownership estimates that there are approximately 6,500 ESOPs covering almost 14 million participants. Employees participating in an ESOP can purchase the stock directly, receive it as a bonus, be given stock options, or obtain stock through a profit-sharing plan.

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