USA – Employee Stock Ownership Plans – ESOP & Others

United States Employee Stock Ownership ESOPUSA- employee share ownership is encouraged and supported by government initiatives and is widely welcomed by employees and business owners. Companies, business owners, executive, key individuals and employees can avail of certain stock plans that may be ‘tax free’ or ‘tax efficient’ to both parties. They can come under a variety of types and names (see below) but we use the generic term ESOP to cover all of these. ESOP benefit can be significant, both to the employer and employee. The rules governing ESOPs can be complex so the cost of establishing and maintaining an ESOP is greater than for other employee compensation plans but the profitability and reduced cost rewards of having employees objectives aligned with those of the business owners are also significant. ESOP World Forum can help you find the knowledgeable advisors who can steer the company through the legal, accounting, and administrative issues peculiar to ESOPs.

Employee Ownership offers a variety of advantages:

  1. Cost-effective way to motivate and reward key staff. Giving employees a business stake business is more efficient & less expensive than pay rises or cash bonuses.
  2. Improved employee retention, deferred rewards encourage loyalty to the company, reduces turnover and can increase productivity amongst employees
  3. The best way to make employees act like owners is to make them owners – a proven way to increase the success / performance of a business.
  4. Employers and employees can make significant tax savings depending on the type of plan.
  5. Tax efficient – setup and operating costs of stock plans are tax deductible for corporations as well as other tax incentives
  6. Advantage of offering shares as remuneration in a ‘bear’ market gives employees scope for greater returns as the economy improves.
  7. Share plans can set the groundwork for business exit strategy.

Recent budgets have made a number of changes to the tax treatment of gains from share schemes, including liability for  the Universal Social Charge (USC) and PRSI.

USA – Employee Share Ownership & Incentive Plan Types

The following are some of the main types of employee share incentive schemes in Ireland:Ireland ESOP APSS Legislation

  • Employee Share Ownership Plans (ESOP)
  • Employee Stock Purchase Plans (ESPP)
  • Stock Option Plans
  • Profit Sharing plans

Overview of employee share plan types

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