ESOP Primer - Getting started

This information is provided for the initial education of non-ESOP business owners and is not a substitute for legal/financial guidance.

According to the Oakland, California-based nonprofit Project Equity (2012 Census data) Indiana members of the boomer generation own 41,770 businesses, employ 832,800 Hoosiers with a payroll of $18.5 B, and total sales of $107.7B. It is estimated that 80 percent of these businesses lack a plan for what they are going to do when their owner retires or, if misfortune falls, dies unexpectedly.

We the Owners Trailer

Each company's journey to become an ESOP is unique.  However the typical steps to establish an ESOP include:

1. Education - obtain a basic understanding of what an ESOP is, how it works, to be able to answer the question  "is an ESOP the right solution for my company"

2. Feasibility Study - an ESOP service provider will analyze the financial condition of the company, understand the goals and expectations of the current owners, build a model, to be able to answer the question "Can we do it"

3.  Partners - Interview and select the ESOP professionals that will guide you on this journey.   This includes the Company ESOP Counsel, the ESOP Trustee, and the Third Party Administrator.  Other professionals may be needed (bank, Counsel, another valuation company, etc.).  The Trustee will select the trustee counsel, and the independent valuation firm to determine the value of the company.

4. Write the documents.  This includes the ESOP plan documents (the guidebook the company will be required to follow), price negotiation, finalize financing, write the seller notes, develop incentive programs. 

5. Implementation - Finalize the documents, and prep to launch the ESOP.

6. Launch - Initiate the ESOP, communicate to the employees, and launch initial and ongoing education and training of all employee-owners.

Have a question, Looking for answers? Contact INCEO.


 

The following resources cover a broad range of topics from business succession planning with employee ownership to building an ownership culture. This list includes links to information on employee ownership generally, as well as to resources specifically for Indiana companies.

 Have a question on Employee Ownership?  Contact INCEO.

Selling your Business

Are you a business owner that is looking to sell your business but want to protect your loyal employees who have helped grow your business?  Have you considered selling your business to your employees?  Check out the NCEO brochure on selling your business, and why selling to employees can be a win-win.

For More Information

Address: 2760 Fortune Cir Dr E # 421983, Indianapolis, IN 46242-1983

Phone: (317) 561-1242

Email: info@inceo.org

Contact the INCEO

For more information on employee ownership in Indiana please email us