ESOP- Employee Stock Ownership Plan- Must know for Entrepreneur

  • An employee stock ownership plan (ESOP) is an employee-owner program that provides a company's workforce with an ownership interest in the company.
  • Under these plans, the employer gives certain stocks of the company to the employee for lesser costs which remain in the ESOP trust fund.
  • These plans are aimed at improving the performance of the company and help in minimizing problems related to incentives.
  • Vesting period: The time limit for availing this scheme. For instance, one can acquire the shares after one completes a particular period of employment.
  • The ESOP is not taxed on acquiring the shares. Employees are taxed on the profit they make when they sell the shares or transfer them.

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