We primarily use 2 worker-owned business structures: employee stock ownership plans (ESOPs) and worker cooperatives (co-ops).

What is an ESOP?

An employee stock ownership plan, or ESOP, is a retirement plan that invests in company stock. A 100% ESOP company (100% employee owned) can be structured to give employee-owners the right to elect representatives to the Board. 100% ESOP companies can operate free of income taxes on profit, but the cost of obtaining and maintaining ESOP status is generally prohibitive for companies with less than $5M in revenue or $1M in payroll.

What is a worker co-op?

A worker-owned co-op is a business owned and controlled by its employees. Worker-owners in a co-op democratically run their business according to the principle of one worker, one vote. This means each worker-owner owns an equal share of the business and has an equal vote in overseeing the business.

Our worker co-op management structure is based on a proven template:

  • Worker-owners elect employee representatives to serve as a Board of Directors.

  • While making decisions for the business, the Board appoints a management team to run day-to day operations (usually the existing management team remains).

  • Annual (or more frequent, if needed) assemblies of all employees make major decisions and set the course for the business.

  • Employees can choose to select a union committee of employee representatives to bargain collectively with the management team regarding workplace terms and conditions.  

  • All profits not reinvested are shared by worker-owners on a one-share per person basis.

Why worker ownership?

Worker ownership is an effective way to engage and retain talented employees while increasing business efficiency and financial performance.

Small business owners may find it difficult to exit their business and retire. They may have trouble finding a buyer, or children may decline to take over. Transitioning a company to worker-ownership allows an owner to exit on their own timeline while sustaining their company’s mission and leaving their legacy in the hands of employees who helped build the company.

Though some small business owners may want to sell to their employees in order to retire, others may want to broaden ownership while continuing to work with their company. Broadening ownership builds wealth for employees, gives them a stake in the business, and creates democratic management.

Transitioning to worker-ownership is not a new or untested business strategy. In fact, it has been used by companies throughout the United States. More than 1,500 manufacturing owners have already sold their companies to their employees through ESOPs and worker cooperatives.

Go here for stories of transitions to worker-ownership.