Employee stock ownership plans (ESOPs) are becoming a popular solution to combatting the heavy federal restrictions on cannabis businesses. Not only are the tax benefits of ESOPs (like making 280E irrelevant) a win-win for the business and the employees, ESOPs create financial equity for workers. They also align with the cannabis industry’s values of fostering inclusivity and wealth-building, and offering a path to long-term financial opportunity for employees.
Before diving into why ESOPs are so effective, we first need to better understand what an ESOP is, how it’s structured, and why even traditional businesses choose to transition to an ESOP.
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Publix and Its Successful ESOP Structure
Essentially, an ESOP is a way to transfer ownership of a company, letting employees become the owners instead of selling to outside investors or competitors. Major corporations in all industries have adopted an ESOP structure to reap benefits such as tax breaks (ESOPs operate 100 percent tax-free), increased employee retention, and increased revenue.
Publix, an employee-owned American supermarket chain, is a prime example of why an ESOP model works and why it’s been so successful.
Publix thrives as an ESOP because the employees are also the owners, creating a strong incentive to work hard. Ownership fosters a collective mindset—when the company succeeds, everyone benefits; when someone underperforms, it directly impacts their coworkers’ financial well-being.
In a traditional company, an underperforming employee might be frustrating, but their actions don’t feel like a direct loss to others. In an ESOP, however, slackers are effectively taking money away from their colleagues and their families.
Even though employees don’t invest their own money—they’re given stock in the company—and as they see its value grow, they become more invested in the business’s collective success. This structure strengthens loyalty, motivation, and long-term commitment, making ESOPs a proven driver of increased productivity.
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ESOPs Align with the Cannabis Industry’s Values of Equity, Wealth-Building, and Inclusivity
It’s simple—ESOPs turn talk into action. Many cannabis businesses emphasize the importance of employee involvement, but an ESOP takes it a step further by making workers actual owners. This creates real financial equity, not just symbolic inclusion.
For business owners, an ESOP isn’t a total exit—it’s a way to transition ownership while staying aligned with the company’s future. Owners can buy back over time, ensuring long-term sustainability while sharing wealth with employees. It’s a true win-win that embodies the industry’s commitment to inclusivity and economic empowerment.
You might be wondering: how do ESOPs differ from profit-sharing or stock options when it comes to creating financial equity for employees?
This is a common question, and it’s important to clarify the distinction.
With stock options and profit-sharing, participation is often limited to select employees. Stock options typically allow high-level executives to buy in, while profit-sharing distributes a small percentage of annual profits among employees. These are short-term financial incentives tied to yearly company performance.
An ESOP, on the other hand, grants employees actual ownership of the company. Unlike profit-sharing, which provides a modest yearly payout, ESOPs build long-term wealth by allowing employees to accumulate equity. The real financial benefit comes when an employee retires or exits the company, receiving a significant payout based on their ownership stake.
For business owners, ESOPs also serve as a strategic transition tool, enabling them to retain control while sharing wealth and aligning employees with the company’s long-term success.
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Are ESOPs the Future of Cannabis?
Adoption is growing. ESOPs provide a legitimate exit strategy with real multiples, keep former owners involved, and offer a second financial opportunity upon federal legalization. The biggest hurdle is awareness—many operators simply don’t know this option exists.
If ESOPs become widespread, the industry will see true equity and inclusion. Employees become owners, aligning incentives across the board. It’s capitalism at its best—creating wealth while fostering collective ownership.