Employee stock ownership plan (redirected from Employee-owned corporation)

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of employees.

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Employee Stock Ownership Plan (ESOP)

A qualified retirement plan in which employees receive shares of the common stock of the company for which they work and the company receives an investment tax credit. The purpose of this type of plan is to give employees a vested interest in the company, thereby providing them with an additional incentive toward greater productivity. See also leveraged ESOP.

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Employee stock ownership plan (ESOP). An ESOP is a trust to which a company contributes shares of newly issued stock, shares the company has held in reserve, or the cash to buy shares on the open market.

The shares go into individual accounts set up for employees who meet the plan's eligibility requirements.

An ESOP may be part of a 401(k) plan or separate from it. If it's linked, an employer's matching contribution may be shares added to the ESOP account rather than cash added to an investment account.

If you're part of an ESOP and you leave your job, you have the right to sell your shares on the open market if your employer is a public company.

If it's a privately held company, you have the right to sell them back at fair market value. The vast majority of ESOPs are offered by privately held companies.