Sell your business to your employees (EOT and ESOP)
Many owners would rather sell to the people who helped build the business. Two tools make that possible: the Employee Ownership Trust in Canada and the ESOP in the US.
Why owners consider it.
Your people know the business. Customers know them. The business keeps its name and its town. And you may get tax help that an outside sale doesn't offer.
In Canada, 28% of small business owners say they plan to sell to employees.[5] Yet only 8% know the Employee Ownership Trust well.[5]
The Employee Ownership Trust (Canada).
An Employee Ownership Trust, or EOT, is a trust that buys your shares and holds them for your employees. Employees don't need to put up cash.
The business pays you over time out of its profits.
As of 2026, a qualifying sale to an Employee Ownership Trust can exempt up to $10 million of capital gains.[7] Confirm with your accountant. That exemption became permanent in 2026.[7]
There are rules. Some of the main ones:
- The trust must own a controlling stake.
- You must have held the shares for at least 24 months.
- You can't be a beneficiary of the trust.
- You can hold no more than 40% of the trustee or director seats.
The rules carry more detail than this. A lawyer and an accountant should check your case before you start.
The ESOP (US).
An Employee Stock Ownership Plan, or ESOP, is a retirement plan. It buys company shares for employees. Like an EOT, the company usually pays for it over time.
As of 2026, selling to an ESOP may let you defer the tax on your gain (Section 1042).[18]
It applies to C corporation stock when the ESOP ends up owning 30% or more.[18] Confirm with your accountant.
S corporations owned by an ESOP have their own tax rules worth asking about.
ESOPs cost more to set up. Most deals run $200,000 to $500,000 all in.[19] That is about 2% to 4% of the sale price.
A sale to an outside buyer costs about 4% to 9%.[19]
The law requires an independent expert to value ESOP shares every year. In 2026, a new US law made it clearer how ESOP trustees can rely on that work.[8]
Is it right for you?
Selling to employees tends to fit when:
- The business has steady profits to fund payments over time.
- You have a strong management team.
- You care about keeping your people and your name.
- You are willing to be paid over several years, not all at closing.
It may not fit if you need all your cash at closing. It may also not fit if no one is ready to lead.
How it compares.
An outside buyer may pay more cash up front. A family member may matter more to you than price. Managers may want to buy it themselves.
That is why we compare all six paths side by side, ranked by what you want.
The first step.
Before you spend on lawyers and trustees, find out if the numbers work. Our 5-minute check shows your estimated value range and how selling to employees ranks for you.
If it looks good, a full study tests the idea. We can introduce you to independent trustees.