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)

What is the definition of non-publicly traded securities for the purposes of Section 1042?

Until 2022, stocks that are quoted only in the Pink Sheets or in the OTCBB were not treated as publicly traded, even if there was a relatively liquid market for the stock. The ESOP Fairness Act of 2022 changed that so that the roughly 800 companies on the OTCQX and OTCQB Venture markets are now considered publicly traded and do not require a valuation for shares in an ESOP in these companies. This is an important issue for the many community banks that have ESOPs.

For more information on banks and ESOPs, see Banks as ESOP Sponsors.

Link to this FAQ Topic: Tax Benefits to the Seller & Company