Business, Legal & Accounting Glossary
Employee stock ownership plan (ESOP), also known as a stock purchase plan, is a program designed to promote purchasing of company stock by the employees. The distribution of stock through an employee stock ownership plan is facilitated by the employee stock ownership trust, which represents actual accounts through which stock is bought and sold. An employee stock ownership plan is a powerful promotional tool. By making an employee stock ownership plan available, companies enable employees to participate in the management of the company. Furthermore, financial incentives and rewards associated with an employee stock ownership plan forge a synergy of interests between employees and shareholders. Corporations that set up an employee stock ownership plan are eligible for tax deductions for employee stock ownership plan dividends for participating employees. An employee stock ownership plan also grants deductions for dividends intended to repay stock acquisition loans.
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This glossary post was last updated: 9th February, 2020