A strategic framework for liquidity, tax efficiency, and long‑term talent alignment 

Family-owned businesses play an essential role in economic growth, job creation, and community stability. As these companies grow and remain private for longer periods, many leaders eventually face a pivotal question, not simply when to sell, but why sell at all. Ownership and leadership succession should be a consistent focus of quarterly and annual planning, alongside capital investment decisions and growth strategies. Beyond the traditional meaning of PPE, which focuses on Property, Plant, and Equipment, CEOs should also consider the Power of a Partial ESOP, the other PPE. A Partial ESOP allows owners to unlock liquidity, diversify personal wealth, preserve their legacy, and maintain control of a major hometown employer. 

This challenge is familiar to many privately held companies. As NOW Health Group CEO Jim Emme noted when announcing the company’s Partial ESOP, “Ownership succession was the missing link in our otherwise successful business growth plans.” Rather than pursuing a sale, the company sought a solution that aligned the interests of ownership, employees, and the broader community. 

A Partial ESOP functions differently from selling a minority stake to private equity or a strategic investor. Those transactions often lead to outside influence, pressure for additional control, and a shift away from the values that shaped the business. In many cases, these outcomes are exactly what owners are trying to avoid. A Partial ESOP creates a long-term ownership structure that supports the mission of the company and the people who built it. 

The Three Core Advantages of a Partial ESOP 

Liquidity, Diversification, and Capital Access 

A Partial ESOP enables owners to convert a portion of their equity into cash while continuing to lead the business. This provides personal diversification and reduces concentrated financial risk. Banks and other financial institutions increasingly support these transactions because they view Partial ESOPs as stable, attractive long-term borrowers. 

Tax Efficiency for Shareholders and the Company 

ESOPs offer meaningful personal and corporate tax advantages. Companies can deduct ESOP-related contributions up to 25 percent of payroll, reducing corporate taxable income. For C corporation shareholders, selling at least 30 percent of company stock to an ESOP may qualify for Section 1042 capital gains deferral, allowing owners to reinvest proceeds while deferring or potentially avoiding capital gains taxes. For S corporations, the ESOP-owned portion of company earnings is exempt from federal income tax, improving long-term cash flow and reinvestment capacity. 

Stronger Culture, Retention, and Ownership Alignment 

Research consistently shows that employee ownership improves engagement, retention, and shared commitment. According to a 2023 National Center for Employee Ownership study conducted for Employee-Owned S Corporations of America, S corporation ESOPs report voluntary quit rates nearly one-third below the national average, and ESOP leaders frequently use employee ownership as a recruiting tool, with more than nine in ten companies explicitly highlighting ownership during interviews and onboarding. A Partial ESOP strengthens culture, deepens employee loyalty, and helps protect the company’s position as a major hometown employer. 

Why CEOs Should Prioritize PPE in 2026 

A Partial ESOP delivers three essential benefits: 

  • Liquidity without loss of control
  • Tax-advantaged diversification opportunities
  • A culture and talent engine that consistently outperforms traditional ownership models

A Partial ESOP provides permanence, alignment, and strategic flexibility that alternative minority recapitalizations cannot match. It allows owners to preserve their legacy, expand long-term employee opportunity, and keep the company rooted in the community. The key strategic planning question for leaders in 2026 is not just how much to invest in Property, Plant, and Equipment, but whether they are planning for the Power of a Partial ESOP.