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Employee Stock Ownership Plan: How ESOPs Work & Who They’re Right For

An employee stock ownership plan (ESOP) is a qualified defined-contribution employee benefit plan that provides the employees of a business an ownership interest in that business. An ESOP is used by employers to either reward employees or as an exit strategy from business ownership. If owned by an ESOP, the business can receive great tax benefits.

How an ESOP Works

An ESOP is an employee benefit plan that’s established by the owners of a company. Using an ESOP, the plan either borrows funds or receives contributions from the company, which are used to purchase shares in the business.

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