Business owners without a succession plan for their retirement can take advantage of a new program launched Monday to provide them with the information, expertise and financial assistance they need to explore creating an employee stock ownership plan.
The Rutgers Institute for the Study of Employee Ownership and Profit Sharing is supporting the New Jersey Economic Development Authority’s new ESOP Assistance Program. Rutgers will educate business owners about the benefits of ESOPs, and, for the first time ever, NJEDA will provide financial assistance to qualifying business owners who want to create one.
An ESOP enables a business owner to sell the company to their employees through a trust, rather than selling to outside buyers. This carries tax incentives and preserves the company culture they have worked a lifetime to establish. The employees pay nothing. They receive shares in the company over time, building long-term wealth. And since they now have a stake in the success of the company, they are motivated to work harder and stay longer.
Bill Castellano, associate director of the Rutgers Institute for the Study of Employee Ownership and Profit Sharing, called the program that went live Monday a “transformational moment for New Jersey business owners.”
“Our research shows that an ESOP can improve performance and productivity, save jobs, and help employees to build wealth,” Castellano said. “The problem is that many business owners don’t know it’s an option, or they don’t have the money to hire a consultant to explore it. That’s where this new program will help.”
New Jersey business owners with at least 20 full-time employees can apply to the NJEDA’s ESOP Assistance Program and, if eligible, they will receive partially covered feasibility study services to explore creating an ESOP. The NJEDA Board recently approved the program and partnered with two firms experienced in ESOP transitions, Onyx Partners Group and Lazear Capital Partners, to provide these services. The ESOP Assistance Program will cover 90% of the service costs, up to $35,000. Funds are available for a limited time only.
The Rutgers Institute for the Study of Employee Ownership and Profit Sharing and its technical assistance unit, the NJ/NY Center for Employee Ownership, will be conducting direct outreach to business owners statewide to raise awareness of ESOPs and the opportunity for funding. Rutgers will also host a free, informational webinar on Wednesday, May 28 at 1 p.m.
“The Silver Tsunami is coming faster than we think,” said Adria Scharf, associate director of the Rutgers Institute for the Study of Employee Ownership and Profit Sharing.
“Retiring business owners do not have to close up shop or sell to private investors,” Scharf said. “An ESOP preserves the business they’ve put their heart and soul into and makes it even stronger. The employees start to think like owners because they are. And research finds that businesses perform better, and employees stay longer, when that happens.”
NJBIA member Paulo Rodriguez Heyman, president and founder of Renova Environmental Company in Ocean Township, launched an ESOP four years ago and said it was a “win-win.”
“I converted paper wealth into tax-deferred, diversified assets, while employees are seeing real growth in their accounts,” Heyman said. “One supervisor noted that project efficiency directly impacts his ESOP balance—a clear sign of ownership driving performance. When we own something, we care more.”
