Employee Stock Ownership Plan

About Employee Stock Ownership Plan:

Employee Stock Ownership Plan (ESOP) is a program that encourages employees to purchase stock in their company and thus participate in its management. Companies with such plans may take tax deductions for ESOP dividends that are passed on to participating employees and for dividends that go to repay stock acquisition loans. Former IRC (check if this IRC provision is current here) §§401 and 4975(c)(7).

See Employer Identification Number and Employer Identification Number.

See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.

Description and Definition of Employee Stock Ownership Plan (ESOP)

A plan in which employees own stock in their company. Dividends paid under an employee stock ownership plan are deductible by the company. Ordinary dividends paid to shareholders are not. If you exercise a stock option under an ESOP you defer payment of tax on any gain until you sell the stock.

Resources

See Also

Further Reading

• Employee Stock Ownership Plan (ESOP) in the West's Tax Law Dictionary
• Employee Stock Ownership Plan (ESOP) in “A Dictionary of Taxation”