We consider three formal structures available for employee-owned
businesses and why these may be suitable.
There are three main structures for an employee-owned
company:
- 100% trust ownership;
- direct ownership of shares by individual employees; or
- a hybrid model with a trust holding the majority, and some
direct share ownership by specific employees.
The most common form is the 100% owned trust structure, as this
is the simplest and cheapest to set up and, if it relates to an
existing business where the owners are retiring or setting up their
succession plan, has capital gains tax advantages for the outgoing
owners.
Trust ownership
In this structure a trust is set up to hold the majority, or
all, of the shares in the company. Usually this an employee
ownership trust ("EOT"). The EOT
will be created by way of a trust deed which will evidence the
creation and also set out the various terms of the
trust. The EOT is a trust with requirements
