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.

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How much does setting up an ESOP cost?

The cost of setting up an ESOP varies considerably. According to recent data as of 2026, costs can range from a low end of $150,000 to $500,000 for most deals, with larger more complex deals costing more. It is important to understand that selling a business through any method is almost always both complex and costly: Most non-ESOP sales require an M&A advisor or business broker, who will charge a percentage of the deal as a success fee plus legal, accounting, and sometimes valuation fees. An ESOP sale is not necessarily any more costly or complex than a non-ESOP M&A deal. 

Several factors affect the cost of an ESOP, which can be more or less depending on the structure of the deal:

1. Attorney fees: The basic design of the plan itself, filing initial forms with the government, negotiating with lenders, performing due diligence, drawing up trust documents, and coordinating other advisers are tasks normally done by the attorney. In a leveraged ESOP, additional fees are needed to cover the legal fees for lending institutions, although in rare cases these can be lowered or eliminated. As the complexity of the transaction increases, of course, so will attorney fees. Adding additional classes of stock, changing other benefit plans, negotiating concessions with employees, dealing with multiple investor groups, negotiating with a parent firm, adding warrants as part of a seller note, and designing equity opportunities for investors or managers are examples of some of the possible items that will add costs.

2. Feasibility assessment: This may be done in-house, but it may be wise to hire an accountant or other adviser to assess how much the company can afford to put into an ESOP. The NCEO has a basic ESOP calculator that can help you decide early on if an ESOP is worth pursuing and a more advanced pre-ESOP feasibility tool available to NCEO members.

3. Plan administration: Once the plan is set up, a plan administrator is needed. Generally, annual administration costs are modest.

4. Trustees: An independent, outside trustee should be hired for any transaction between a non-ESOP owner and the ESOP. This will typically add costs in the mid-five figures per year, mostly to pay for the trustee's risk exposure.

5. Investment bankers: If the company needs assistance locating and securing financing, investment bankers can be hired. They may charge a percentage of what they finance or the financing they find, especially for large transactions. In smaller cases, feasibility, financial structuring, and loan placement are often combined. Many smaller transactions will not use all these services, however. If a company is using seller financing, investment banking fees are not necessary.

Some companies use an M&A advisor to consider selling to an ESOP versus other buyers. This will involve an additional success fee. If you know you want to sell to an ESOP, this step is not necessary and will reduce costs significantly.

6. Valuation: An initial appraisal may cost from the low five figures and up in most ESOP transactions, but can be a multiple of that in complex cases, such as where there are multiple lines of business or different classes of stock. Subsequent annual valuations cost about half this amount.

These estimates were made in 2026 and change over time.

Link to this FAQ Topic: ESOP Basics & Feasibility