Really Smart



An Employee Stock Ownership Plan (ESOP) is an employee benefit plan that allows employees to become part owners of the company they work for. The employer sets up the ESOP and contributes stock or cash to the plan on behalf of the employee. These contributions are typically used to buy shares of the company’s stock for the employee’s retirement account. An ESOP is a type of retirement plan that provides benefits to employees by allowing them to own a portion of the company’s stock. The stock is held in a trust and the employee’s ownership is based on their length of service and amount of contributions to the plan. Over time, the employee’s ownership stake can grow as the company’s stock price increases. An ESOP also has other benefits for the company, such as increased employee motivation and loyalty. By giving employees a stake in the company’s success, they will be more likely to work hard to help the company succeed. In addition, ESOPs can provide tax benefits to the company, as the contributions to the plan are tax-deductible. An example of an ESOP is the S Corporation ESOP, which allows employees to own up to 100% of the company’s stock. This type of ESOP allows employees to become shareholders in the company and reap the benefits of their ownership such as voting rights, dividends, and capital appreciation. Fun Fact: According to the National Center for Employee Ownership, there are 11,500 ESOPs in the United States that cover 14 million employees.