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)

Can S corporation distributions (also called dividends) be passed through to employees in an S corporation?

Passing through distributions in an S corporation to plan participants is not very practical. The pass through would require the consent of each employee and would be subject to taxation. It is not clear if you could allow each employee to choose to elect to get a dividend or whether they all would have to choose, but advisors say that the issues created by the pass through would not be worth the potential benefits.

Link to this FAQ Topic: S Corporation ESOPs