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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Is the trust a taxable entity in an Employee Ownership Trust (EOT)?

The trust in an employee ownership trust company is a taxable entity. This would generally only come up if a company is a pass-through entity, such as an S corporation or LLC, or in a C corporation in which the trust receives dividends or proceeds from the sale of a company. Because of these tax rules, employee ownership trusts would not normally be set up in an LLC or an S corporation. These companies would first convert to C status. C corporations pay tax at the corporate level so there would be no tax paid by the trust unless it receives dividends or the company is sold.

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

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