The benefits of selling for business owners
Retirement Planning
Selling business owners can realise the value of their life’s work while ensuring a smooth and secure transition for their employees.
Tax Advantages
Under current tax legislation, subject to certain rules, a seller can sell their shares in the company and have no liability for tax. This means that the seller can sell their shares entirely tax-free and this can result in significant tax savings.
Preserving Legacy
An EOT allows founders to protect their company’s legacy, culture and values, ensuring that the business continues to thrive under employee stewardship. Founders can, and often do, remain in the business and can continue to earn a fair market salary.
The benefits for qualifying employees
Ownership and Influence
Employees become part owners, giving them a say in the company’s decision-making processes and fostering a sense of empowerment and pride.
Job Security
An EOT provides stability and security for employees, as the trust’s primary objective is to safeguard the long-term viability and prosperity of the business.
Financial Participation
Employee ownership allows workers to share in the financial success of the company, creating a direct link between their efforts and the rewards they receive. After creation of the EOT, employees will receive a share of the profits of the company. This employee distribution of profits is also deductible from the company’s corporation tax, thereby reducing the tax liability of the company.
What are the results of these benefits? – The Facts
EOTs are becoming the preferred succession planning option for selling business owners. This is a direct result of the many benefits for both the owner and the employees, and is backed up by a number of compelling statistics:
The number of EOTs has increased by over 50% in the past five years, demonstrating a growing trend in adopting this model.
Research shows that EOTs have higher productivity levels, with studies reporting up to a 4% increase in productivity compared to conventionally owned firms.
A survey conducted by the Employee Ownership Association revealed that 75% of business owners who sold to an EOT were satisfied with their decision.
Governments worldwide are recognising the benefits of employee ownership and are introducing supportive policies and tax incentives to encourage its adoption.
