Might Be Right

For Your

Business Succession

Whether it’s months or years from now, you’ll have to make some of the most important decisions of your career:

When to sell all or part of your business

To whom to sell your business

How to maximize the resulting liquidity

Yes, you could sell to an external source like a strategic buyer or a financial buyer. But those options might not align with your specific goals, which is why you should consider whether an Employee Stock Ownership Plan (ESOP) could make more sense.

Meredith and Michael

The Fiocchi McCarthy ESOP Group of Wells Fargo Advisors specializes in educating business owners about these plans and supporting you before, during and after your transition.

What Is An ESOP?

An ESOP is a business succession option that allows you to sell part or all of your company. The shares are placed in a tax-qualified trust, which offers your employees the opportunity to become owners of your company by vesting into shares over time.


Benefit From:

ESOP-cap-gains.png Potential personal capital gains tax deferral
ESOP-diversify.png Diversifying your assets
ESOP-timeframe.png Keeping control for as long or short a time frame as you want

Your Company
Benefits From:

ESOP-corp-tax.png Corporate tax
ESOP-retention.png Increased employee
ESOP-satisfied.png An ownership culture which, when properly communicated, leads to increased employee satisfaction and retention


Your Employees
Benefit From:

ESOP-transition.png A stable and predictable transition
ESOP-retirement.png A retirement plan that doesn’t require them to contribute funds
ESOP-biz.png Thinking and acting like business owners

How Is An ESOP Different?

You get tax breaks.

ESOPs can provide tax advantages at the corporate level. Through an Internal Revenue Code (IRC) § 1042 election, a business owner can defer and potentially eliminate their personal capital gains tax.


Wells Fargo Advisors is not a legal or tax advisor.


You receive flexibility.

You decide how much — or how little — of your company you want to sell over a series of transactions (if desired).

You can customize to your timeframe.

With an ESOP, you can retire over the course of months or years.

You reward loyalty.

Employees of an ESOP are generally more productive, feel more rewarded and are retained longer, because they know they own the business where they work.

Here's How To Know If An ESOP Is Right For You

While an Employee Stock Ownership Plan may be appealing, it comes with a few pre-requisites. Ask yourself these questions to see if this option may be a fit for you and your company:

ESOP-1-icon-gold.pngDo you want an option to sell, even when there are no optimal buyers?

ESOP-2-icon-gold.pngDo you want to incorporate more strategy into your estate plan?

ESOP-3-icon-gold.pngDoes your company have 20 or more employees?

ESOP-4-icon-gold.pngAre you interested in passing control to people you know and trust?

ESOP-5-icon-gold.pngDo you want a partial liquidity event while continuing to work or sell the entire company instead?

If you answered “Yes” to three or more of those questions, an ESOP might be worth considering.

ESOP Facts and Figures

  • Hundreds of thousands of businesses are ideal for employee ownership.
  • ESOP companies are 75% more likely to stay in business.1
  • Participants in S Corporation ESOPs had retirement balances of $67,000 more than non-ESOP contemporaries.2
  • Nearly 75% of workers would prefer working for an Employee-Owned company.3
  • The prevalence of ESOPs might be more common than expected, as there are almost 14 million employee owners across the country participating in an ESOP.4
  • ESOP companies are roughly 4X more likely to retain employees, even during times of economic turbulence or uncertainty.5
  • ESOP ownership exists in a wide range of industries, including architecture, construction, manufacturing, accounting and many more.6
  • Employees aged 28-34 who are employee owners have 53% longer median job tenure, compared to their non-owner counterparts.7
  • Employee owners of an ESOP have 33% higher income than non-ESOP company employees.7
  • ESOP companies generate 2.5% more new jobs per year than these same companies would have generated if they did not have an ESOP.8

Here’s what might be the most surprising stat of all: Almost 80% of business owners have not put together a succession plan.4
Are you part of that majority? If so, you can never start planning your succession options — Including ESOPs — too early.
1 Upjohn Research, 2017. https://www.esoppartners.com/blog/do-employee-owned-companies-grow-faster#:~:text=A%202017%20report%20suggested%20that,higher%20rates%20than%20other%20businesses.
1 https://research.upjohn.org/up_press/241/
2 NCEO Study, 2019-2020. https://esca.us/studies-and-surveys/study-by-nceo-finds-that-employee-ownership-provided-resiliency-and-financial-security-during-crisis/
3 National Opinion Research Center at the University of Chicago, 2018. https://www.businesswire.com/news/home/20190524005008/en/
4 NCEO Study, 2020. https://www.esop.org/articles/world-employee-ownership.php#:~:text=As%20detailed%20in%20Employee%20Ownership,participate%20in%20stock%20purchase%20plans.
5 NCEO Study, 2010. https://dewittllp.com/news/2020/10/28/in-pandemic-esop-companies-laying-off-fewer-employees-than-non-esop-companies
6 NCEO study, 2020. Figure 1 found at https://www.nceo.org/articles/employee-ownership-by-the-numbers
7 Employee Ownership & Economic Wellbeing. NCEO, 2017.
7 Employee Ownership & Economic Wellbeing. NCEO, 2017.
8 https://www.nceo.org/assets/pdf/Economic_Growth_Through_EO.pdf
The footnote associated with the stat in that pdf can be sourced from (2013), "Sharing Ownership, Profits, and Decision-Making in the 21st Century", Kruse, D. (Ed.) Sharing Ownership, Profits, and Decision-Making in the 21st Century (Advances in the Economic Analysis of Participatory & Labor-Managed Firms, Vol. 14), Emerald Group Publishing Limited, Bingley, p. iii. https://doi.org/10.1108/S0885-3339(2013)0000014025
9 Wilmington Trust Surveys, 2019. https://growbiz.fiu.edu/2019/11/do-you-have-a-succession-plan-in-place-for-your-small-business-more-than-70-do-not/#:~:text=Indeed%2C%20according%20to%20a%20recent%20study%2C%2072%25%20of,their%20companies%20to%20deal%20with%20making%20a%20plan