Benefits Of An EOT
An Employee Ownership Trust is where shareholders of a business sell their shares into a trust on behalf of all the employees. An EOT helps business owners to sell at a fair market price, however, they would need to obtain a professional business valuation.
An EOT has become more popular in recent years and has many benefits that will not only affect the exiting business owner but also the employees and management team.
Higher Staff Retention
With an Employee Ownership Trust, your staff are more involved in the company, with higher levels of engagement and productivity. Your team will be more invested, and likely to be more loyal to your business.
Furthermore, when your company is hiring, being an EOT is appealing to potential employees and will attract more applicants if mentioned in your recruitment process.
Increase In Innovative Behaviour
As your team are more involved and invested in the business, they become more passionate about the work your company does. Their drive for success increases and therefore, there will be an increase of innovative thinking and behaviour.
Your people will put the time and effort into outside the box thinking, focusing on coming up with new and interesting ideas that will help your business stand out. This new effort and increase in productivity will help to improve your business’ performance and be a platform for future growth.
Easier And More Beneficial Sale
Selling directly to a trust ends up being quicker and smooth for shareholders than trade sales. They don’t involve a third party, there are no negotiations. Furthermore, there is no capital gains tax payable on the sale of shares to an Employee Ownership Trust. An EOT needs to always be in control so a business owner will have to sell at least 51% to the trust. Employees will also benefit from an EOT as they can be given a bonus of up to £3600 per year tax free, assuming sufficient profit is made.
A trust holds many benefits for both business owners, employees, and potential buyers. Employees want to contribute to the success of the company and even if business owners don’t exit completely, staff become more invested and contribute to important decisions leading to growth in the long term.
Employee Ownership Trusts give owners the opportunity to leave behind a sustainable business, a positive work environment that maintains the company’s core values.
Visit Exit Planning to read more about EOT’s and other possible Exit Paths.