The benefits of the Employee Ownership Trust
The Employee Ownership Trust (EOT) is being more widely adopted in the UK. Let's delve into the pragmatic advantages that an EOT brings for sellers, employees, and the business itself.
For sellers considering the sale of their controlling shares, an EOT stands out as a tax-efficient option, ensuring a capital gains tax-free transaction. Transparency is assured as the market value of shares is determined through an independent assessment, offering a clear and predictable process. Unlike a trade sale, an EOT provides a defined exit timeframe, shielding sellers from uncertainties and ensuring a legacy is left behind with satisfied employees.
Employees, on the other hand, find compelling benefits in an EOT-owned business. Tax-free annual bonuses of up to £3,600 become a reality, fostering a positive work environment. Additionally, employees gain a voice in the decision-making process, contributing to a sense of belonging and shared success. As previous shareholders are compensated, all employees collectively participate in the economic benefits, directly linking their efforts to the business's success.
Beyond individual gains, the organisational advantages of an EOT are substantiated by studies. Employee-owned businesses consistently exhibit resilience, profitability, and sustainability. Motivation and performance receive a boost, as employees become vested in the business's success, fostering a committed and entrepreneurial mindset.
Real-world success stories, exemplified by companies like John Lewis, the Arup Group, and Richer Sounds, underscore the benefits of employee ownership. The top 50 employee-owned companies in the UK collectively generated over £20 billion in sales, employing over 150,000 staff. Their steady year-on-year growth in sales, operating profit, and productivity solidify the positive impact of embracing employee ownership.
Below is a summary of the key takeaways. If you want to find out in your business is ready for an EOT sale, then take our test.
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Succession
You sell the business to the team members that have helped you build and run it. The team are more motivated and engaged and transformed into motivated owners You can be involved as much or as little as you need to be.
Buyer
The buyer will be the EOT on behalf of your team. Negotiation is simpler and seamless. There will be no integration or cultural fit concerns. And there is zero interruption to the business.
Timing
As there are no third parties to negotiate with, no solicitors to go back and forth over tiny details, the whole process can be kept on a timetable and completed quickly. We have completed EOT sales in as little as 4 months from being appointed to cash in the sellers bank account.
Uncertainty
A virtually guaranteed sale. Once valuations are set and HMRC clearance is obtained (don’t worry – we do all of this for you), it’s a simple process of signing paperwork and completing the sale (don’t worry – we do all of this for you too).
Tax
Selling your company to an EOT means you will be 0% capital gains tax. You keep all of your sale proceeds.
Take our 5 minute test to see if you are ready for an EOT
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