Why Accountants Are Recommending Employee Ownership Trusts to Businesses

Published On : 08/20/2024

Businesses are increasingly recognising the benefits of an Employee Ownership Trust (EOT), and with good reason. This progressive business model supports the long-term sustainability of a company, securing its legacy whilst rewarding the workforce – and that’s why Dains Accountants believes in the benefits of an EOT.

Lisa Richards, Accounts Advisory Partner at Dains, has worked in the industry for over 20 years, supporting owner-managed and growing businesses through providing her expert advice. Having worked actively in Derby, also as a board member for a range of local charities, Richards’ involvement in the Derby business community is a testament to her industry knowledge.

Here, Richards discusses why EOTs are a secure and reliable option for business owners to protect the future of their company.

What is an Employee Ownership Trust?

An Employee Ownership Trust is a structure that allows a business to be owned by its employees, promoting shared responsibility, greater employee motivation, and a more sustainable business model. Unlike traditional share schemes, an EOT provides employees with a collective stake in the business without requiring them to purchase shares.

This means that in cases of exit business planning and people succession planning, if a business owner does not have family to pass the business onto or does not want to leave the business to a competitor, they are left with another option: an Employee Ownership Trust.

Why choose an EOT?

Businesses of all sizes are increasingly turning to EOTs as a way to secure the future of their company. John Lewis is an example of a large corporation that has successfully implemented an EOT, and now the John Lewis Partnership is the largest employee-owned business in the UK.

EOTs also work excellently for SMEs, encouraging loyalty and nurturing a culture of ownership, because in its nature an EOT rewards loyal employees.

EOTs offer numerous advantages, including:

Enhanced employee engagement: With employees owning a significant portion of the company, they are more likely to be committed to the company’s success. This links with its effects on employee loyalty, encouraging a culture where employees feel more connected to and invested in a business.

Succession planning: EOTs provide a structured and tax-efficient way for business owners to transition ownership, ensuring continuity and stability for its employees and its legacy. This means business owners don’t have to worry about the future of their business if there are no other options for the selling of the business.

Why Accountants Are Recommending Employee Ownership Trusts to Businesses

Tax benefits: Both the selling shareholders and the business itself can benefit from tax incentives, making EOTs an attractive option for many businesses.

Increased productivity: Studies have shown that employee-owned businesses often see a boost in productivity and innovation, particularly due to their nature of encouraging employees to feel like an asset to the business.

As a complex process to face, having the support of an accountant can ensure that the process is smooth, compliant, and tailored to the unique needs of your business. That’s where a support network such as Dains can step in, helping your business to successfully implement an EOT, for the benefit of its future, and in turn, its staff.

About Dains

Dains is a national accountancy and advisory group, which draws on nearly 100 years of expertise and dedication to growing SME businesses in the UK and Ireland. Its core services include accountancy and business services, audit and taxation. Specialist support extends to corporate finance, forensic accounting, and probate.

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