27 % increase in businesses transferring ownership to employees in a year to 542

The number of businesses transferring ownership to employees through Employee Ownership Trusts (EOTs) has surged by 27% in the past year, reaching 542, up from 428 the previous year. This significant increase, part of a 2,750% rise in new EOTs over five years, highlights the growing appeal of EOTs as a business exit strategy. Established by the government in 2014, EOTs offer a tax-efficient way for business owners to pass their shares to employees, avoiding income, capital gains tax (CGT), and inheritance tax liabilities. Mark Turner, a partner at Lubbock Fine, emphasizes the rising popularity of EOTs among entrepreneurs seeking to exit their businesses. The model allows owners to sell their shares to employees via a trust, often at full market value, with future profits financing the transaction. This approach is particularly attractive if changes to the tax system, such as a CGT increase, make private equity buyouts less appealing. EOTs not only provide a tax-efficient exit but also enable business owners to preserve their company culture and reward long-standing employees. Entrepreneurs concerned about potential cultural shifts following a sale to a private equity firm may find EOT agreements more suitable. Furthermore, from an Environmental, Social, and Governance (ESG) perspective, EOTs align with the desire to support employees who contributed to the company s success. In summary, the growing number of EOTs reflects their increasing financial attractiveness for business owners looking to exit their companies while maintaining their culture and rewarding employees. The potential changes to the tax system may further boost the appeal of EOTs as a viable alternative to private equity buyouts. <|end|>

Source: ifamagazine.com
Published on 2024-10-07