Selling your business to an Employee Ownership Trust (EOT) can be an excellent way to secure your legacy, reward your staff, and get a decent payout for yourself too. But one of the biggest concerns for many founders is cost. How much will the process actually set you back? It’s important to understand both the obvious and hidden costs involved, so you can budget realistically and avoid nasty surprises.
This guide explains the main areas of expenditure you should expect in an EOT transaction. It’s important to understand both the obvious and hidden costs involved, so you can budget realistically and avoid nasty surprises.
Stamp duty
Not always mentioned (it’s not money the adviser receives, so why should they mention it?!), but stamp duty will be one of the larger costs in most EOT transactions. In percentage terms, it’s small, at 0.5% of the sale price. But do be aware it’s payable within a few weeks of completion, and is based on the full sale price (even though you’ll be paid over multiple years to follow). So definitely bear this in mind when considering your cash flow projections.
Calculate stamp duty with our EOT valuation tool
Adviser fees
Professional advice doesn’t come cheap, and AI hasn’t yet taken away all lawyer/accountant roles! Fees will vary wildly, but for an average SME, expect to pay £20k-50k with most firms. Go EO are an exception, offering a streamlined service at much lower cost (prices starting from £6,990+VAT).
If you have a suite of advisers assisting you, make sure any quotes you get cover all the key areas: valuation, tax clearance, legal documents, and submissions to Companies House/HMRC. Plenty of founders have found themselves bitterly disappointed when they have lengthy chats with perhaps a lawyer, setting the scope, getting the formal quote…and then a few months into the process realise they need to find an additional firm with additional cost to do the valuation, tax clearance, and submissions.
Trustee and governance setup
Once the sale completes, the EOT must be properly established and governed. Costs here include appointing trustees (which may involve paying independent trustees a fee), holding meetings, and setting up reporting systems. These costs are often overlooked, but they are important for ensuring compliance and building staff confidence in the new ownership structure. They’re also generally “ongoing” costs, rather than “one off” costs of the transaction.
Financing costs
Most EOTs are vendor financed. This means there is no formal financing in place, so there won’t be any associated costs. This isn’t always the case though, so if you do seek external funding to pay for the shares, ensure you factor in costs relating to this.
Additional support services
Beyond the technical tax and legal work, many businesses invest in complementary support to make the transition smoother. This can include communications consultancy to manage the announcement – to staff and the wider world, HR support to update contracts, or leadership coaching to help senior managers adapt to new roles. These services are optional, but they can significantly improve the chances of a successful transition and should be budgeted for where relevant.
Accounting costs post sale
Ignoring transaction costs, you may find your accountancy fees increase a little post sale. Three potential areas for this:
- Payroll – the profit share payments (as/when made) may require some manipulation of your payroll software to ensure the first £3,600 per tax year per employee is tax free (but not NIC free), and anything above that is fully taxable.
- Trustee company – whilst this company should remain dormant, it will require an annual confirmation statement and dormant accounts. Neither are big jobs, but they’re still little extra tasks the accountant didn’t have to do before.
- Lack of familiarity – this shouldn’t necessarily lead to increased fees, but not all accountants fully understand how EOTs work. Things like how to treat the deferred consideration payments in your trading company’s accounts, what impact these, and profit share payments, have on corporation tax etc.
None of the above are individually huge, so they shouldn’t lead to vast increases in fees. But it’s not unreasonable for your accountant to charge a little more, as your affairs have become more complex.
Comparing costs to other sale options
Compared to a trade sale, EOT transactions are often more predictable in cost. Trade sales can involve protracted negotiations, extended due diligence, and expensive legal wrangling, all of which drive fees upward. EOT sales are typically more collaborative and streamlined, which keeps costs down. However, they are not cost-free, and going in with a realistic sense of total expenditure is crucial.
Read more about EOTs vs other exit plans
Conclusion
The total cost of an EOT sale varies depending on the size and complexity of your business, as well as the advisers you choose. At a minimum, you should expect to budget for professional fees covering valuation, tax clearance, and legal documents, plus governance and trustee costs after completion. If you decide to add communications, HR, or leadership support, costs will rise. But so too will the chances of a successful, lasting transition. By approaching the process with eyes open, you can avoid surprises and ensure your EOT delivers value for you and your employees alike.
Ready to see what an EOT could cost for your business?