Employee stock ownership plans (ESOPs) allow owners of privately held companies to share ownership with their employees. Technically, ESOPs are defined-contribution employee benefit plans that invest primarily in the stock of the employer company. As such, most ESOPs distribute the stock to employees as a benefit, rather than selling employees the shares. ESOPs are commonly used to give retiring owners a way to cash out all or part of their holdings without selling the entire company. But creating a market for shares of the company can also be used to raise funds for expansion. ESOPs are easy to set up and are used by thousands of employers.
Excerpted from Grow Your Business