What are the benefits of Employee Ownership Trusts?
Placing a business into an employee ownership trust can offer a variety of benefits to business owners looking to exit a business, employees of the business and the business as a whole.
Benefits of Employee Ownership Trusts for business owners
Placing a business into an EOT offers a number of benefits for business owners starting a company or looking for an exit strategy, including:
1. It is a tax-efficient way to sell a business
As long as certain conditions are met, transferring the controlling stake in a business into an Employee Ownership Trust can remove the seller’s liability for any Capital Gains Tax (CGT) that would otherwise be due on the sale. This can make the sale significantly more valuable to the outgoing owners.
2. Securing the future of your company
If you have spent years building up your business, you will no doubt want to see it and the team you have put together continue to thrive and grow. Placing your company into an Employee Ownership Trust can help to protect the business and its employees for the future.
3. Attract the best talent to your business
If you are starting a new business or running an existing company, placing it into an Employee Ownership Trust can offer a highly effective way to reward employees and keep them engaged, allowing to attract and retain the best talent.
Benefits of Employee Ownership Trusts for employees
Working for a business held in an Employee Ownership Trust offers a number of benefits, including:
1. Seeing the financial benefits of the company’s success
Each employee can receive a bonus of up to £3,600 per year income tax-free, allowing workers to see a direct financial benefit when their hard work leads to increased profits for the business.
2. Maintaining the company’s independence
When a business is sold, this can often lead to significant uncertainty for the employees, including the prospect of redundancies, as well as concerns over the way the culture or values of a business might change. Employee ownership can be a way of allowing a company to stay independent and avoid these issues.
Benefits of Employee Ownership Trusts for businesses
1. Achieving a smooth succession
Placing a business into an Employee Ownership Trust can allow for a gradual, carefully planned and managed transition, helping to keep the business running effectively on a day-to-day basis during the transition.
2. Keeping the previous owners’ experience and expertise
It is common for outgoing owners to retain a percentage of the business while taking on a reduced role, at least during an initial transition period. This can allow the business to continue benefiting from their knowledge, skills and personal connections.
3. Increasing employee engagement
By giving workers a real stake in the business, placing a company into employee ownership can massively boost employees’ sense of connection to the business, leading to greater employee engagement, productivity and loyalty.
Is an Employee Ownership Trust suitable for your business?
Employee Ownership Trusts can be a good choice for many types of businesses under various circumstances, including where:
- You are a business owner looking for a smooth exit strategy that protects your business and employees
- You are starting a new business and want to attract the best people
- You are the employees of a business and want to find a way to buy out the owners for everyone’s benefit
To see whether creating an employee ownership trust could be the right choice for your business contact our specialist team who can prepare a feasibility report for your company