Worker Co-ops are Simpler than ESOPs

“I would prefer to sell this business to my employees, but an ’employee stock ownership plan’ (ESOP) sounds too complicated for a small business like this one.

“I’ve been reading online about ‘worker’s co-operatives’ that can be set up using a limited liability company (LLC), but as I understand them LLCs cannot retain earnings — everything must be distributed to the owners at year-end, which would prevent this business from growing over time.

“Could you please address this in one of your future columns?”

First of all, this reader gets my nomination for sainthood. Most of my retiring clients would grab at the cash being offered by the competitors and leave their former employees twisting slowly in the wind.

The concept of a worker cooperative, dating back to the 1930s in the United States, is beginning to be dusted off and looked at with fresh eyes, not only in situations like this one but in millennial-owned ventures that are rejecting the traditional pyramid-shaped hierarchy in favor of a more collaborative (some might say socialistic) approach to management.

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