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 are the advantages and disadvantages of delaying repurchase obligations after employees terminate employment?

Delaying the repurchase conserves company cash, but, assuming the former participants' account balances remains in company stock, it also means people no longer with the firm benefit from its growth. If the company's stock value increases faster than alternative investments the company might make, or the company's after-tax cost of money, then delaying the repurchase can simply mean what is owed to employees grows faster than the company's ability to pay. On the other hand, delaying distributions can be important if employees who have large account balances are tempted to leave the company to cash in their accounts.

For more details, see Creating a Sustainable ESOP Distribution Policy

Link to this FAQ Topic: Distributions & Repurchase