All business owners need to consider succession planning. Sometimes, a business owner may want to move on to a new challenge, they might need to sell the company for financial reasons, or it might be time to retire. In these situations, you need to consider the best option; for many, it will be an employee ownership trust (EOT) sale. So, what are the benefits of an EOT?
Higher levels of employee engagement
For any business to succeed, you need engaged employees to boost productivity and improve employee retention. An EOT can encourage employee engagement as staff will be directly impacted by the performance of the business. This can also prevent high staff turnover as employees have a stake in the business. EOTs can be complex, so it is always a good idea to work with a chartered accountant that can guide you through the EOT process.
Bonuses free of income tax
A major financial benefit to an EOT is that annual bonuses for staff will become free from income tax. Employees will be allowed to receive up to £3,600 in annual bonuses free from income tax, which is a great way to keep your staff happy and motivated while showing appreciation for their hard work.
Employees share in growth & success
EOTs are smart because they allow employees to share in the growth and success of the business. With regular ownership, employees do not benefit from the business’s growth and improvement. Still, with EOTs, they will be a part of this success, and this often drives innovation, increasing the business value and employee’s share value.
Improve business performance
Leading on from this, EOTs often result in improved business performance because the staff is more focused on the long-term success of the business. As a business owner, you want to make sure that you are leaving your company in capable hands and EOTs are an effective way of doing this without the need to find an external buyer.
These are just a few of the key benefits of an EOT to be aware of. All business owners need to think ahead to the future and put a plan in place for when they move on, whether this is a new challenge or retirement and an EOT is often the best solution that can ensure the long-term success of the business and smooth transition.
