T

he federal government just made it a lot easier to form an employee-owned business.

Employee stock ownership plans (ESOPs), created in 1956, by the late political economist Louis O. Kelso, are currently the most common way to do this because it gives regular workers a way to buy companies, and ESOPs have meaningful federal tax incentives. This allows new owners to set up a trust, which secures a loan that the company itself will pay back over several years.

A key feature is that the company, not the workers, steps forward to provide the collateral for the loan, and as the loan is paid down, new shares are distributed to employees and managers. The workers do not purchase the shares with their savings.

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