Broad-based employee ownership in private US companies, whether for a gradual buyout or a single transaction, is mainly created through trust-based solutions. Usually, this means an employee stock ownership plan (ESOP), with employee ownership trusts as a low-cost alternative that lacks the ESOP’s detailed rules but also lacks its tax incentives. Some companies, however, prefer direct employee ownership, where employees personally acquire and own company shares. That generally means a gradual buyout and is especially suitable for certain industries, particularly professional services such as engineering, architecture, and wealth management, and it can work well in other sectors where employees have the necessary risk tolerance and disposable income or the company provides significant contributions. This book details two models for direct employee ownership. The Tandem Center’s model makes direct ownership easier with incentives such as matching shares, discounted shares, and/or favorable financing. A second model has employees buy interests in a partnership. This book discusses how these models work as well as the associated legal, accounting, financing, and other issues, and includes detailed case studies of companies that followed this path.
