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An Employee Stock Ownership Plan (ESOP) in the United States is a defined contribution plan, a form of retirement plan as defined by 4975(e)(7)of IRS codes, which became a qualified retirement plan in 1974. [1] [2] It is one of the methods of employee participation in corporate ownership.
Employee ownership requires employees to own a significant and meaningful stake in their company. [7] The size of the shareholding must be significant. This is accepted as meaning where 25 percent or more of the ownership of the company is broadly held by all or most employees (or on their behalf by a trust). [8]
Indirect Ownership on behalf of all employees by the trustee of an employee trust; and; The Hybrid Model, which combines both direct and indirect ownership. [2] An EOT is a form of indirect ownership in which the trustee of the EOT holds shares in a permanent or long-term trust on behalf of all employees.
Trustees [2] have certain duties (some of which are fiduciary). These include the duty to: Carry out the expressed terms of the trust instrument. [3] Trustees are bound to act in accordance with the terms of the trusts upon which the trustee holds trust property, and commit a breach of trust by departing from the terms of the trust. [4]
In the broader sense of the term, relating to trust law, a trust is a legal arrangement based on principles developed and recognised over centuries in English law, specifically in equity, by which one party conveys legal possession and title of certain property to a second party, called a trustee. The trustee holds the property, while any ...
Establishing a trust as part of your financial plan is something you might consider if you have extensive assets or simply want a measure of control over how those assets are managed after you're ...
The trustee to whom property is legally committed is the legal—i.e., common law—owner of all such property. The beneficiary, at law, has no legal title to the trust ; however, the trustee is bound by equity to suppress their own interests and administer the property only for the benefit of the beneficiary.
Employee trusts exist for many purposes and have a wide range of titles. If the terms of the trust meet requirements prescribed by tax or other regulations, then the employee trust is likely to be known by the name given in the relevant regulations, for example, a share incentive plan or an employee stock ownership plan.