What’s an ESOP? It stands for employee stock ownership plan and is formally defined as “when a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares,” according to the National Center for Employee Ownership.
Loren Rodgers, executive director at NCEO, says there are many reasons to utilize this tool, but it is most commonly used for “someone who owns a business and doesn’t want to sell it to a competitor when they’re retiring, so they sell it instead to their employees and get some cash out of it themselves.”
