Share Scheme Choices for Owner Managed Businesses
As a business owner a way to get the best out of employees can be to issue them with equity. This gives them a stake in the business and can be a tax efficient way to reward them.
Owner managed businesses have a myriad of different options available to them since they often qualify for government approved schemes such as SIPs, CSOPs and EMI. They also tend to have more flexibility with respect to share capital structure which can facilitate the use of schemes such as Growth Shares and JSOPs.
In designing a scheme there are a number of typical factors which influence design such as:
- What is the value of the business
- What are the ambitions of the owner
- Does the business pay dividends
- Who will receive the equity
- Should there be performance or time based vesting
- What kind of dilution is reasonable
- What is the existing share capital structure
At Pett Franklin our knowledge of valuation, tax, share scheme design and project management experience allows us to design and implement a scheme to fit your business.
Employee Ownership Trust
As well as expertise in employee share schemes Pett Franklin is uniquely placed to implement an Employee Ownership Trust or EOT conversion. Many of the businesses that seek to convert to an EOT model are owner managed businesses with founders that wish to scale down their involvement or exit the business without going down the route of a trade or private equity sale, or a management buy out.
EOTs can offer an alternative path whereby the business is sold to the very employees that help run it. Founder involvement can continue in various ways, including retaining a minority stake in the company, and generous tax reliefs are offered as part of Government initiatives to widen employee ownership.
Please see our page on EOTs for more information on how EOT conversions work and why they might be the most attractive solution for a founder seeking to exit their business with the assurance it will continue to grow and be run according to their vision.