In the US there's no EOT-specific cap or floor on the sale price. Unlike an ESOP, where the Department of Labor under ERISA bars the trustee from paying more than appraised fair market value, a US Employee Ownership Trust runs under ordinary state trust law, so the seller and company set the price far more freely. The real limits are standard IRS fair-market-value rules and what the business can repay. Discounting, even partial gifting, is allowed.
No EOT-specific price limit. US Employee Ownership Trusts carry no statutory price cap or floor. An ESOP does: it is a regulated retirement plan, so the Department of Labor oversees it under ERISA, the trustee relies on an independent appraisal, and the ESOP may never pay more than appraised fair market value ("adequate consideration"). A US EOT has no ERISA overlay. It runs under state trust law, which generally honors the terms the founder sets while still imposing fiduciary duties on the trustee, so the price is set far more flexibly, usually by the seller and the company.
What actually constrains the price (none of it unique to EOTs):
- IRS rules. Any sale of a business interest is subject to fair-market-value treatment. If the price exceeds fair market value, the IRS can treat the excess as ordinary taxable income to the seller. A price below fair market value can also carry tax consequences (potentially gift-tax), though treatment of a below-market sale to a trust is fact-specific.
- Affordability. Most EOT buyouts are funded by a seller note repaid from operating profits over roughly 5–10 years, often blended with senior bank debt. Cash flow therefore caps what the company can realistically pay regardless of the appraised number.
- The founder's choices. Founders can sell below the highest-possible strategic-buyer price, and many deliberately discount or gift part of the company to make the buyout affordable.
On discounting and valuation. Nothing bars a founder from discounting; discounting or partial gifting is a recognized way to make a transition work, bounded only by the ordinary IRS framework around fair market value and gifts. An independent valuation is commonly used to document the price, but unlike an ESOP it is not legally required for an EOT, though a lender or the goal of defending the price to the IRS often makes one expected in practice.
No US capital-gains break. The UK grants qualifying EOT sales a special capital-gains exemption; the US does not, and there is no Section 1042 deferral for EOT sales (that deferral is only for a sale to an ESOP or an eligible worker-owned cooperative).
This is general education, not legal or tax advice; pricing, valuation, and the tax treatment of any discount are fact-specific, so confirm your structure with a CPA and an attorney experienced in employee-ownership transitions. If you've set a price or structured a discount in your own EOT sale, contribute the specifics to sharpen this entry for other founders.