Part 2: Designing Your ESOP: What Business Owners Need to Know
ESOP Plan Design: One Size Doesn't Fit All
When it comes to setting up an ESOP, there's no such thing as a cookie-cutter approach. Every company's culture, financial situation, and long-term goals should shape the plan's design.
At Schechter Benefits Law Group, we work with companies to craft customized ESOP plans that balance business objectives with employee benefits — while staying fully compliant with ERISA regulations.
Key Design Considerations:
- Who is eligible to participate?
- How will shares be allocated — equally or based on compensation?
- How long will employees need to work before becoming fully vested?
- How will repurchase obligations be handled as employees retire or leave?
Pro Tip: Companies should build flexibility into their plan design to account for future business growth, cash flow changes, and employee demographics.
California Bonus Incentive:
With the state's new ESOP Loan Guarantee Program, small businesses now have more options to finance the transition to employee ownership — but plan design will play a key role in accessing those funds.
Coming Next:
In Part 3, we'll explore the operational side of ESOPs — including compliance, fiduciary duties, and how California businesses can leverage ESOPs for long-term growth.
If you're considering an ESOP for your company, let's start the conversation.
Contact us today at sblgllp.com to explore how an ESOP could work for your business.
