Employee Ownership 101

Photograph of co-op members posing in front of their van
CareWorks Community Homecare Cooperative was a 2021 D.C. Co-op Impact Grant Recipient. Photo provided by CareWorks Community Homecare Cooperative.

Employee ownership is a possibility

More than 50% of small business owners do not have a plan for their businesses when they retire. Business owners have many options, including passing their business to family members, selling to management team or investors, or selling to employees. There are thousands of successful, thriving, employee-owned businesses across the U.S and most are more successful than they were when they were privately-owned.

Employee ownership can be the right solution

In addition to providing a tax-preferred exit strategy for selling shareholders, employee ownership has many other benefits, including:

Boosts company performance 

Employee-owned firms tend to out-perform comparable companies, while exhibiting more resilience during economic downturns. (Rutgers University and the SSRS survey firm)

Improves wages and benefits

Employee-owned companies also tend to have higher wages and better benefits (National Center for Employee Ownership)

Increases well-being through Quality of Work Life and Balance

Employee-owned companies contribute to employee-owners' well-being and may be associated with more emotionally and physically healthy employees. (Boguslaw & Schur 2019)

Preserves jobs and community impacts

Maintaining jobs locally rather than moving or losing them. (Project Equity)

Helps companies attract and retain good employees

Employee-owned firms with engaged cultures have higher retention rates. (Rutgers University and the SSRS survey firm)

Creates new tax benefits for the employee-owned business

Some employee-owned firms, such as 100% ESOP S Corps, are tax exempt.

Enables employees to build wealth over time

Once the selling shareholder and associated loans are paid off, a portion of annual profits are allocated to employee retirement accounts.

Learn more about your options

Schedule your free consultation today with one of our in-house experts to help make an informed decision that’s best for you and your company.

Which employee ownership model is the right fit for your business? 

Employee Ownership Trust (EOT)

EOTs are owned by a perpetual trust requiring all profits, aside from what is needed for reinvestment, go to the employees.

Worker-owned Cooperatives

Worker-owned cooperatives are a democratic business model where workers share ownership and decision-making for the business.

Employee Stock Ownership Plan (ESOP)

ESOPs give workers ownership interest in the company through a benefit plan.

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