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 would a sale to an Employee Ownership Trust be financed?

The sale of stock to an employee ownership trust (EOT) is typically financed by a loan, either a bank loan and/or seller financing. Banks will typically not loan for more than 30% to 40% of the value of a company, so seller notes are needed for 100% sales. The seller can set any reasonable rate of interest. The company, not the employees, pays off the loan out of future earnings.

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

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