An ESOP is an employee benefit plan which makes the employees of a company owners of stock in that company.
Several features make ESOPs unique as compared to other employee benefit plans.
First, only an ESOP is required by law to invest primarily in the securities of the sponsoring employer. Second, an ESOP is unique among qualified employee benefit plans in its ability to borrow money. As a business owner, how would you like to get some of the equity out of your business, pay no current tax on the proceeds, and retain control of the company. ESOPs can also be used to increase corporate cash flow, to provide fully tax deductible financing for expansion, acquisition, to finance existing debt, or any other legitimate corporate purpose. These opportunities would be more than enough to make ESOPs attractive to business owners, but they are only part of the ESOP advantage.