A Conceptual Guide to Employee Ownership for Very Small Businesses

Summary

For companies with fewer than 20 employees that will stay that size, that do not plan to go public, and that do not want or cannot do an ESOP

Many smaller companies want to share ownership with employees but find the legal costs and complexities of various common plans daunting. For owners wanting to sell to employees, an employee stock ownership plan (ESOP) has great tax benefits, but its costs and complexities may be daunting. For other owners who just want to share some kind of equity interest with employees, stock options or restricted stock may be good choices, but other companies want something simpler still, or, if they are limited liability companies, do not have actual stock to share. So what kinds of strategies are available for these companies?