List of business entities Forms of business ownership vary by jurisdictionbut several common entities exist: A sole proprietorshipalso known as a sole trader, is owned by one person and operates for their benefit.
For owners wanting to sell to employees, an employee stock ownership plan ESOP has great tax benefits, but its costs and complexities may be daunting. For other owners who just want to share some kind of equity interest with employees, stock options or restricted stock may be good choices, but other companies want something simpler still, or, if they are limited liability companies, do not have actual stock to share.
So what kinds of strategies are available for these companies? Companies share ownership with employees for a variety of reasons. For some people, the reason may be simply "it's the right thing to do. Employee ownership can have benefits for owners of businesses, employees, and their companies.
To attract and retain good employees. Many small businesses have trouble attracting and retaining good employees. Using employee ownership as an employee benefit can be an important way to address this problem. To buy out an owner. In almost every small business, the owner or owners will eventually want to leave.
Often no family member or colleague can take over and there are no buyers willing and able to buy the business at a reasonable price. Selling the business to employees can be a way out of this dilemma. Starting or running a small business is difficult.
Many people find that sharing the responsibilities of ownership with others lessens these burdens. Employee ownership can help provide additional capital. Employee owners may be willing to contribute to the company by buying shares or taking lower wages in return for stock.
To make the business perform better. Several reliable studies indicate that, on average, employee-owned firms perform substantially better than non-employee owned firms when ownership is combined with employee participation in decisions affecting their work.
Certain employee ownership structures qualify for tax benefits.
A Primer on Ownership The word "ownership" is used in different ways by different people. Legally, ownership of a business is a bundle of rights to reap the benefits of that business and to make decisions about how the business is run.
The basic rights in a business are the right to company income, the right to the surplus value of the company if the company is sold, the right to make decisions about how the business should run, and the right to sell all or part of the value of the business.
In non-employee ownership companies, employees receive the right to some of the company's income through wages, but not other rights.
Employee ownership companies involve employees in some or all of the other myriad rights of ownership. The particular way in which the rights of ownership are assigned to owners in the company depends on its legal structure.
A business must be set up in one of three ways: In a sole proprietorship, business property, liability, and income are treated as the personal property of a single person. These businesses will have to first establish a partnership or incorporate to share ownership with employees.
Ownership in Partnerships A partnership is composed of two or more partners who carry on a venture for profit. Income is passed through to partners and taxed at personal income tax rates.
Each partner is liable for all the debts and obligations of the partnership. A partnership can also have limited partners, who are not liable for debts and obligations but receive income like other partners. Limited partners cannot take an active part in the management or operation of the company, which generally means that employees cannot be limited partners.
Partnerships are problematic for employee ownership.This article needs additional citations for verification. Please help improve this article by adding citations to reliable rutadeltambor.comced material may be challenged and removed. (August ) (Learn how and when to remove this template message).
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Sep 28, · An ESOP, or an employee stock ownership plan, is a retirement program that allows participating individuals to acquire ownership interest in their employer’s organization.