This post copied verbatim from NBC on Dec 14th,2013
Workers unite! (So you can become capitalists)
Mark Koba CNBC
conference room at JCJ Architecture. The firm became fully owned by its employees this year.
A conference room at JCJ Architecture. The firm became fully owned by its employees this year. The number of worker-owned businesses in the U.S. is growng by about 10 percent each year.
It\’s good to be one of the bosses — but what if the bosses are also the workers?
The number of employee-owned business is growing by about 10 percent each year in America — the spiritual home of capitalism — but that doesn\’t mean the country is turning communist.
The National Center for Employee Ownership says there can be big benefits for a business owned by the people who work for it — so-called ESOP\’s, or firms with Employee Stock Ownership Plans.
\”There are tax benefits for owners to sell to their workers, and workers get good retirement packages from ESOPs as owners,\” said Loren Rodgers, executive director of the NCEO.
\”The numbers are increasing because people are worried about their retirement,\” she said.
In 1999, there were 9,400 firms with employee stock ownership plans. Currently, there are at least 11,500 such firms with assets totaling $400 billion and employing some 13 million people, according to the NCEO.
And the growth rate for companies setting up ESOPs—for either partial and full employee ownership—is now 10 percent or higher every year.
American workers owning some or all of their company is nothing new. However, a major boost to employee-ownership came from passage in 1974 of federal legislation providing special tax benefits to ESOPs—the legal structure which most firms now use for worker ownership.
Companies are usually bought by workers through the purchase of the owner\’s private or public stock. A trust in the ESOP will own the stock and the debt that came with it. Funds for the company purchase come predominately from bank loans.
The ESOP trust also works as a defined contribution retirement plan—which has financial contributions from both workers and the company—that gets paid out to workers after a certain length of employment.
Those retirement plans are creating the recent push to ESOPs, said Rodgers.
And easier credit has helped as well, said Howard Levine, a partner and chair of law firm Drinker Biddle & Reath\’s ESOP team. \”Banks are loosening up when it comes to loans for ESOPs,\” he said. \”There\’s some optimism on the banks\’ part when it comes to these loans.\”