Business owners in New Jersey now have access to a new program aimed at facilitating the creation of employee stock ownership plans (ESOPs). The initiative, launched on Monday, is designed to provide business owners with the necessary information, expertise, and financial support needed to explore this option for succession planning.
The Rutgers Institute for the Study of Employee Ownership and Profit Sharing has partnered with the New Jersey Economic Development Authority (NJEDA) to support this ESOP Assistance Program. Rutgers will focus on educating business owners about the benefits of ESOPs, while NJEDA will offer financial assistance for those who qualify.
An ESOP allows business owners to sell their companies to employees through a trust rather than external buyers. This approach offers tax advantages and helps maintain the company's established culture. Employees do not pay for these shares but receive them over time, thus building long-term wealth and having a vested interest in the company's success.
Bill Castellano, associate director of the Rutgers Institute, emphasized that this program represents a "transformational moment for New Jersey business owners." He stated: "Our research shows that an ESOP can improve performance and productivity, save jobs, and help employees build wealth."
Eligible New Jersey business owners with at least 20 full-time employees can apply for NJEDA's ESOP Assistance Program. If approved, they will receive up to 90% coverage on feasibility study services related to establishing an ESOP, capped at $35,000. The NJEDA Board has recently approved this program and partnered with Onyx Partners Group and Lazear Capital Partners for service provision. However, funding is available only for a limited time.
Rutgers' technical assistance unit will actively reach out statewide to inform business owners about ESOP opportunities and available funding. Additionally, Rutgers will host a free informational webinar on May 28 at 1 p.m.
Adria Scharf from Rutgers highlighted the urgency by saying: "The Silver Tsunami is coming faster than we think." She added that retiring business owners don't need to sell or close their businesses but can instead preserve them through an ESOP: "Employees start thinking like owners because they are."
Paulo Rodriguez Heyman of Renova Environmental Company shared his positive experience after launching an ESOP four years ago: "I converted paper wealth into tax-deferred diversified assets while employees are seeing real growth in their accounts."
