Employee Share Ownership Trust (ESOT)
What it is:
Employee Share Ownership Trust (ESOT) refers to a plan that assists in acquiring and allocating a company's stock for employees.
How it works (Example):
A company uses an ESOT to sell its stock to its employees. ESOT's are trust accounts that help the company to achieve this purpose.
Why it Matters:
Setting up ESOTs has three purposes. The first is that they provide an arena for the company to review how their employees will handle their shares. Also, it offers a tax inducement for the employee to utilize should they decide to sell their shares back to the company. Additionally, the company develops a small market for the shares to be transferred to their employees in a cost effective manner as well as trains the employees on stock ownership.