What every employee-owned business should keep in mind as you close out the year.
As 2025 winds down, business owners are focused on closing the books, refining tax strategies, and preparing for the year ahead. For companies with an Employee Stock Ownership Plan (ESOP)—or those considering one—this is the right time to assess performance and align the plan with broader business goals.
According to the National Center for Employee Ownership (NCEO), more than 6,500 ESOPs operate in the U.S., covering nearly 15 million participants. As interest in employee ownership grows, Q4 is a critical checkpoint to ensure your ESOP stays on course.
At First American Bank, we support privately held companies in designing, financing, and maintaining ESOPs that meet their long-term objectives. Whether you're experienced or just starting out, here are five key actions to consider before the year ends.
1. Review your Plan Document – Do Your Initial Goals Still Match Where the Company is Today?
The ESOP is a living and breathing entity and the Plan Document needs to adapt with the changes in the business.
Ask yourself:
- Are we still providing the proper level of benefit to our employees?
- Do the vesting and payout schedules still make sense?
- Are there former employees still in the plan benefiting from the performance of the business?
A review of the plan provides a great opportunity to re-engage your ESOP professionals and make sure the plan is working the way it was initially intended.
2. Discuss Your Current Debt Structure
With constant changes in interest rates and market dynamics, you want to ensure you’re maximizing your capital stack.
Year-end questions:
- Would we benefit from refinancing some of our Seller Debt?
- Are there outstanding warrants and how quickly is that liability growing?
- Have we paid down enough debt with our Bank or has the company’s performance improved enough to reload our initial loan?
Work closely with your ESOP lender to make sure you’re utilizing debt in the most efficient way possible.
3. Plan for Cash Flow and Repurchase Obligations
ESOPs offer significant tax advantages — especially for S-corporations — but they require thoughtful cash management.
Consider:
- You likely just paid last year’s repurchase obligations, but what does that amount look like for this year?
- Have you budgeted available liquidity for future share repurchases as employees retire or leave the company?
- If you’re a C-Corporation or a partially-owned S-Corporation ESOP, are you fully leveraging available tax savings to strengthen your financial position?
Your bank or financial advisor can help model these factors to ensure your ESOP enhances rather than strains your liquidity.
4. Engage and Educate Your Employee-Owners
An ESOP transforms employees from workers into owners — but that mindset requires ongoing communication.
While October is officially Employee Ownership Month, year-end is a perfect time to:
- Have your ESOP Communications Committee meet to plan events for the year ahead.
- Highlight how daily actions and teamwork contribute to company value.
- Celebrate employee contributions to your company’s success and future growth.
When employees understand their ownership stake, they’re more motivated to act as invested partners — a powerful driver of productivity and retention.
5. Look Ahead: Is an ESOP Part of Your 2026 Succession Strategy?
If you’re planning ownership transition or considering options to preserve your company’s culture, an ESOP can offer a market for your shares, tax advantages, and a path to sustainable business continuity.
We guide business owners through:
- Feasibility studies to evaluate if an ESOP fits your goals
- Financing solutions, including leveraged ESOP transactions and seller financing
- Ongoing legal, trustee, and valuation support
Whether retirement is around the corner or a decade away, starting your ESOP conversation early puts you in control of your legacy.
Your ESOP is more than a retirement plan; it’s a strategic business tool that requires regular attention. As the year ends, take this opportunity to review, recalibrate, and plan ahead.
At First American Bank, our ESOP team is here to support your goals—now and in the years ahead. Let’s talk about how we can help your business and your employees thrive.
Contact Information
For expert guidance on your ESOP strategy or to discuss financing options, please contact:
Jamie Walrack
Executive Vice President
First American Bank
(847) 586-2285
[email protected]
1650 Louis Avenue, Elk Grove Village, IL 60007
