Employees can share in the ownership of a company by engaging in an Employee Stock Ownership Plan (ESOP). The ESOP was a part of the Employee Retirement Income Security Act of 1974. An independent business valuation is required to ensure that the company’s share value is well documented and unbiased.
ESOP transactions in closely held companies must be based on a current appraisal by an independent outside valuation expert. Such valuations are required to determine share repurchase prices when employees leave, die or retire.
Annual valuations are often performed with quarterly, or semi-annual updates as required.
