Employee Share Ownership Trust (ESOT)

Written By
Paul Tracy
Updated August 5, 2020

What is an Employee Share Ownership Trust (ESOT)?

Employee Share Ownership Trust (ESOT) refers to a plan that assists in acquiring and allocating a company's stock for employees.

How Does an Employee Share Ownership Trust (ESOT) Work?

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 Does an Employee Share Ownership Trust (ESOT) Matter?

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.