Converting to Worker Ownership: A Guide

Jason Weiner explores workplace conversions with a legal lens

In a recent article, Colorado lawyer Jason Wiener walks through how companies transitioning sole ownership or ownership by a select group to a structure where employees collectively own the company.

Weiner covers two models, worker cooperatives and employee stock ownership plans (ESOPs). He argues out that converting to employee ownership entails careful legal, financial, and operational adjustments, according to Wiener. While profit-sharing is a key driver, other motivators, including preserving local jobs, enhancing business performance, and boosting employee engagement and wealth, hold significance for different employers and employees.

Photo by Scott Graham on Unsplash

Wiener goes on to say that the timeframe for conversion to an employee ownership model typically spans 6-18 months due to owners exploring various options before deciding. Selecting the right attorney, well-versed in the owner's priorities, is crucial.  In Colorado, there is an employee ownership tax credit which may offset conversion expenses like legal fees.

Many conversions occur when owners prepare to retire, framing the question around their desired legacy. The article likens the importance of an experienced attorney in the conversion process to the risk of self-diagnosis through platforms like WebMD, stressing the attorney's role in narrowing down potential models through conversation and insight.

Maintaining updated and accurate financial records is crucial when converting because the financials need to be shown to eyes outside the company.  It is also important for governance structures to align with the new business model. When addressing the governance topic it is important to be practical and realistic. Future financial and capital planning goals, whether short or long term, should also be considered when making a decision. 

Wiener also notes that owners often struggle with relinquishing authority, and the planning process may reveal if ownership conversion is suitable for everyone.

Go Deeper:

• Read the original article by Jason Wiener 

• Read my article exploring steward ownership

• Check out Tiffany Vargas’s article with case studies from Colorado