If you own a business and have not put a succession plan in place, you might be thinking that the best choice, when the time comes to retire, is to simply sell your business outright to the highest bidder. However, selling your business to your employees may be a better option in certain situations, through what is known as an Employee Stock Ownership Plan (ESOP). Here’s how an ESOP works. The company in question creates a trust on behalf of its employees. A portion of the profits are directed into the trust, which in turn uses the money to purchase the owners’ shares. This purchase can take place over time or all at once. Employees can minimize the potential burden of the purchase by borrowing against future earnings, without incurring costs upfront. How prevalent is the use of ESOPs in business transitions? There are currently more than 10,000 companies successfully
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