Go EO for Business Owners
Own a company, but love the idea of employee ownership?
Depending on your goals, there’s two different routes to go down, or potentially both!
You want to sell up. Potentially you’ll continue to work there, but it won’t be “your” company anymore.
You’ll still control the company, but want senior staff to buy in, giving them “skin in the game”
You want to sell up whilst also ensuring key staff are incentivised to make it work.
This is where the Employee Ownership Trust (EOT) is a great option.
It’s a form of “indirect” share ownership. As the trust, not individual employees, buys the shares.
The EOT needs to buy a controlling stake to the main tax perks, which include zero CGT payable by you plus tax free future profit share payments for employees.
Incentivise Key Staff
Here you should consider Enterprise Management Incentive (EMI) share options.
Not all companies can do these. There are size limits, and some trades don’t qualify.
However, if you meet the criteria and want to incentivise key staff, EMI is a great option!
If you don’t qualify, Company Share Option Plan (CSOP) are almost as good. Less restrictive criteria, but the tax perks are less generous.
A downside to 100% EOT ownership is nobody individually has much to lose if it goes badly.
“Errr…isn’t that a good thing?”
Yes and no. Business will be tricky from time to time. Things will go wrong. Customers/suppliers will be difficult. Tools will break. Staff will fall out.
If you’re “just” an employee, you apply for other jobs, get one, and the issues aren’t your problem anymore. If several key people do this, the business is quickly in trouble.
When people own shares directly, they lose out if they walk away causing the business to collapse.
Hence why it can be popular to combine indirect ownership for the many (EOT) with direct share ownership for the more critical few (EMI/similar).