Unlock the Power of Employee Ownership
for Your Small Business

The California Employee Ownership Act, authored by Senator Becker and approved by Governor Newsom in 2022, aims to reduce the barriers for businesses seeking to transition to employee ownership and worker-led models, such as employee stock ownership plans and worker cooperatives. The California Office of the Small Business Advocate (CalOSBA) is partnering with Project Equity to provide information about employee ownership options and to support small businesses achieve successful transitions to employee ownership.

What is Employee Ownership?

Employee ownership is a highly flexible business model in which employees are offered an equity stake in the company making them co-owners. This proven strategy can reduce the risk of going it alone, both financially and through increased employee engagement. It is a game-changer for small business owners looking to:

Plan your succession: Transition partial or full ownership to employees while preserving your legacy
Boost revenue and efficiency: Engaged employee-owners drive business growth and streamline operations
Access capital and liquidity: Gain flexibility to invest in your future while rewarding your team
Recruit, retain and reward talent: Attract and keep top-tier staff with ownership incentives

Types of Employee Ownership

There are three main types of employee ownership, all of which have been around for many decades: Employee Stock Ownership Plans (ESOPs), worker cooperatives and Employee Ownership Trusts (EOTs). Each employee ownership model has key characteristics.

	EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)	WORKER-OWNED COOPERATIVE	EMPLOYEE OWNERSHIP TRUST (EOT)
SUITABLE COMPANY SIZE	40+ employees, $750K+ EBITDA	Any size	Any size
TAX BENEFITS TO SELLING OWNER	Can opt for §1042 deferral of gains	Can opt for §1042 deferral of gains	No
TAX BENEFITS TO EO BUSINESS	S Corp tax avoidance	Tax deduction for patronage	Tax deduction for profit-sharing
SETUP AND ONGOING COSTS	High	Low	Low
FLEXIBILITY OF MODEL	Within ESOP parameters	Within coop parameters	Highly flexible
EMPLOYEES BUY THEIR SHARES	No	✔	No
EMPLOYEE ROLE IN STRATEGIC DECISION-MAKING	Optional	✔	Optional
PARTIAL EO TRANSITION	✔	✔	✔
PROFIT-SHARING BUILT IN	No	✔	✔
	Learn more	Learn more	Learn more

Hear from a Business Just Like Yours

Listen to the stories of DELTA Pipeline (ESOP), Happy Earth Cleaning (worker-owned cooperative), and Local Ocean Seafoods (EOT) three businesses that were transformed through employee ownership:

Delta Pipeline

Happy Earth

Local Ocean Seafoods

Learn More

Employee ownership is more than a strategy—it’s a solution. Explore how it can work for your business.

📘 Free eBook

Download our guide, “Three Flavors of Employee Ownership,” for a deeper dive into the three forms of employee ownership.

Download the eBook

🎥 15-Minute Video

Learn from a former small business owner turned employee ownership expert. Hear her insights on how this model can work for you.

Watch the video

💼 Free Consultation

Connect with a dedicated employee ownership expert for personalized advice on how to transition your business.

Schedule a consultation

Additional Resources

What is Employee Ownership – Information and resources on the various forms of employee ownership from National Center for Employee ownership
Becoming Employee Owned Toolkit – Walkthrough of the transition process, description of the values of worker ownership, and examples of California employee-owned businesses
Employee Ownership by the Numbers – National Center for Employee Ownership’s collected data of ESOPs and other employee stock ownership plans in the U.S.
2023 Worker Cooperative State of the Sector Report – Democracy at Work Institute’s biennial census of worker owned businesses around the country
Case studies of employee-ownership transitions – Stories from business owners from a variety of industries on their experiences transitioning to employee ownership
California Worker Cooperatives – An in-depth look at the cooperative landscape in California
Worker Cooperative Resources and Projects – Sustainable Economies Law Center’s resources for starting, supporting, or cultivating worker cooperatives