Employee Ownership Trusts

Succession and extraction of value built up in the business is a problem for many business owners.

An Employee Ownership Trust or EOT is a trust set up for the benefit of the employees, managed by the trustees, similar to the John Lewis model. The Trust buys the shares in the company from the owner using surplus cash in the business. Over the next few years the company makes a payment out of profits to the Trust which then pays this to the business owner. At the end of the agreed period, the shares have been paid for from the company’s own profits.

By setting up an EOT, the sale by the business owner to the trust can be TAX FREE! It should be less stressful and risky than selling to a third party, and employees’ jobs are secure, even benefitting from annual tax-free bonuses. The business owner can still work for, and earn a salary from the company.