Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

Are the earnings of the EOT taxable?

In a C corporation, the trust would normally not have any earnings to be taxed. Dividends would be paid directly to the employees. In an S corporation, earnings attributable to the trust are taxable at the highest personal income tax rate. For that reason, employee ownership trust companies either are or convert to C status.

For more details, see Using an Employee Ownership Trust for Business Transition.

Link to this FAQ Topic: Employee Ownership Trusts (EOTs)