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Control
your exit strategy
tailored to you, your company, and your team.
Transform
employees into co-owners
to shape their futures and preserve your legacy.
Use
the $10M capital gains exemption
to save up to $2.5M in taxes (available until 2026).
EMPLOYEE OWNED 2024 CONFERENCE
Employee Owned is the world’s biggest employee ownership conference, hosted by the American ESOP Association in Las Vegas. This year they’re hosting a special stream to profile the new Canadian Employee Ownership Trust, and providing a special rate for Canadian attendees. Business owners and advisors shouldn’t miss this chance to learn about our new laws and connect with employee ownership experts from across the continent.
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Employee ownership has many benefits
For Businesses
Legacy Preservation
EOTs let business owners entrust their legacy with their team, ensuring the company’s values, culture, and mission continue.
Tax Savings
Until 2026, a $10M capital gains exemption is available for selling to an EOT, resulting in significant tax savings.
Benefits to Society
EOTs contribute positively to society by preserving local jobs and keeping companies Canadian-owned.
For Employees
Financial Opportunity
Employee ownership provides a new pathway to wealth for all employees.
Higher Job Satisfaction
Employees in employee-owned businesses experience greater job satisfaction and engagement because they have a stake in the company’s success, which leads to higher employee retention.
Greater Stability
An EOT provides stable, local ownership which creates long-term opportunities for employees and their families.
What is an Employee Ownership Trust?
An Employee Ownership Trust (EOT) is a new succession option introduced in Canada based on successful models from the U.S. and UK. This structure enables you to sell the majority (at least 51%) of your company to your employees at fair market value, paid out of future company profits.
The shares are then owned by the trust rather than by the employees directly. Your employees will benefit from your company's future success without you having to change the way your business is run.
So, instead of selling your business to a competitor or a private equity company that won’t continue your legacy the way you intended, an EOT makes it possible for you to leave your company in the hands of the people who helped build it while both you and your employees financially benefit from your exit.
Who is eligible for an EOT TAX INCENTIVE IN CANADA?
Most individuals who own shares in a Canadian business and who have worked in the company at some point in the past will qualify for the tax incentive if they sell a controlling interest in their company to an EOT. Consult your advisor to determine if you qualify.
HOW TO IMPLEMENT AN EOT?
To assess whether an EOT is appropriate for your situation, consult with your accountant, attorney, wealth advisor, or exit planner. The resources we provide are for informational purposes only and do not constitute legal or financial advice.
Preparing for an EOT
Think through whether an EOT is right for your succession plan, your company and your employees.
Execute the Sale
Establish the EOT with appropriate financing for your company and with trusted partners.
Make the Transition
Ensure a smooth transition by planning and fostering a sense of ownership among employees.
Learn more from our Employee Ownership Resources
Is an EOT right for you and your business?
Canadian Government Legislation Explainer
EOT: What they mean for Canadian business owners
frequently asked questions
1. How does an EOT benefit business owners?
EOTs allow business owners to preserve their company's legacy and values while receiving fair market value for their business. They also offer significant tax advantages, including up to $10 million in tax-free capital gains.
2. Do employees need to contribute money to buy the company through an EOT?
No, employees don't need to contribute their own money. The purchase is typically funded through the company's future cash flow, making it accessible to all employees regardless of their financial situation.
3. How much of the company needs to be sold to an EOT?
In order to qualify as an EOT-owned company, it must be at least 51% owned (majority-owned) by an EOT. This ensures that employees have a majority stake in the business, promoting true employee ownership.
4. Can the original owner still be involved in the business after selling to an EOT?
Yes, previous owners can remain in their management positions and retain up to 49% of the equity and 40% of the Trustee and Company Board seats of the company. So, while the previous owner cannot control the board’s decisions, they can have a say in important matters and continue to lead the companies they’ve built.
5. How are the benefits of ownership distributed among employees in an EOT?
Benefits are distributed based on formulas that consider factors such as wages, hours worked, or years of service. The Canadian EOT offers flexibility in how benefits are distributed, allowing the original owner to choose from various formulas to best suit their company's needs.
6. How is an EOT different from a worker co-op?
EOTs are a form of indirect ownership, where shares are held in the trust on behalf of employees, but not by employees directly. This makes it easier for companies to maintain their existing management approach while transitioning ownership to employees. A worker co-operative is a form of direct ownership where each employee (after a probation period) can own shares and vote democratically on company decisions. Each model will be appropriate for different companies. For more information on worker co-ops, please see https://canadianworker.coop/.