It’s Business, And It’s Personal

Why employers may want to consider selling to employees

On Behalf of | Nov 8, 2019 | Buying & Selling Businesses |

A business owner who is thinking about selling their company at some point might want to consider setting up an employee stock option program (ESOP). While many small businesses have ESOPs, it may work just as well for companies with more than 100 employees. This makes it possible to spread the cost of the program among a wider pool of individuals. Furthermore, companies will generally go into debt to create the ESOP, which means that they will need to be able to handle the additional liability.

An ESOP may be best for owners who aren’t planning on leaving the company for about five years. In some cases, it can take 10 years or more for employees to obtain full ownership of the business. However, owners may be able to sell a portion of their businesses right away to help them lock in some of their gains.

Business owners should consider whether the employees are capable of running their companies before they leave. In many cases, there will be situations when decisions must be made by a specific person or group of people. Therefore, it is important to identify key employees who can be trusted to act as the company’s representatives after the transition is complete. Generally speaking, creating an ESOP can be beneficial by helping to increase worker loyalty and morale.

The sale of a business can be much easier if it is simply being given to the company’s employees. This is because the terms of the deal are largely worked out ahead of time. Furthermore, due diligence into creating an ESOP might take less time and money to complete. An attorney could assist a business owner during the process of selling their company, regardless of who the buyer or buyers may be.