The EOT – More Than Just a Hot New Tax Acronym

Steve Virgil & John Griffing, The EOT – More Than Just a Hot New Tax Acronym, 25 Wake Forest J. Bus. & Intell. Prop. L. 258 (2025).

This article considers the issues that arise when organizing an Employee Ownership Trust (“EOT”) and the tax consequences that may result.  The EOT is a relatively new business succession strategy in the United States.  EOTs have their roots in the United Kingdom, where they emerged as a unique form of employee ownership.  The concept of EOTs can be traced back to the early 20th century, and the structure has gained more attention since the 1970s, with nearly 2,000 businesses currently held in trust structures.  This gain of attention was influenced by the cooperative movement of the late 19th and early 20th centuries.  Cooperatives, where workers owned and controlled the businesses they worked for, demonstrated the potential for employee ownership to empower workers and improve company performance.  However, the cooperative model faces challenges, such as limited access to capital and difficulties in attracting and retaining talent.  

EOTs provide a more flexible and adaptable form of employee ownership, allowing companies to transfer ownership into a trust that would benefit all current and future employees while maintaining the company's legal structure and operational control.  This approach provides a balance between employee empowerment and the needs of the business.  The John Lewis Partnership is a well-known EOT and is recognized as the first EOT in Britain.  The company is a leading retailer in the country, operating department stores, supermarkets, and other retail outlets across Britain.  The company has been employee-owned since 1929, where owners collectively share its profits and participate in its governance.  

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