NJ Paves The Way For More Employee-Owned Businesses

It's a story that's all too common in New Jersey: a successful business owner wants to retire – but protect the livelihoods of their hardworking employees. And that's where "worker-owned companies" can fill in a crucial gap, supporters of a new state law say.

Gov. Mikie Sherrill recently signed legislation that makes it easier for a small business owner to pass the torch to their employees, giving them official ownership of the companies they once only worked at.

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The bill, S4218/A5016, gives the New Jersey Economic Development Authority (NJEDA) additional ways to facilitate the effort through the state's Employee Stock Ownership Plan (ESOP) program.

According to the governor's office, New Jersey is home to nearly 90 ESOPs, with nearly $65 billion in plan assets covering over 423,000 current employees and retirees and an average stock account for eligible current employees of nearly $190,000. 

The bill enables the authority to administer loan financing and other financial tools through a newly-established Employee Ownership Revolving Loan Fund – the first such fund in the nation to directly finance employee ownership formation.

The NJEDA will also be allowed to:

• Provide financial assistance to defray the costs of employee ownership feasibility study services
• Offer consultative services to participating businesses that have elected to transition to an employee ownership model
• Publish information and resources about employee ownership models for employees and employers on the NJEDA website
• Conduct outreach to businesses, in partnership with educational institutions, on the advantages and implementation of employee ownership models
• Furnish education, outreach, and early-stage technical assistance on employee ownership models, enabling businesses to proactively incorporate employee ownership models into growth and succession planning

"Helping businesses stay rooted in New Jersey is vital to protecting thousands of jobs and millions of dollars in investment," Gov. Mikie Sherrill said.

Sponsors of the legislation include Sens. Andrew Zwicker and Shirley Turner, and Assembly members Lisa Swain, Roy Freiman, and Al Barlas.

Financial experts who gave a thumbs-up to the bill included Alanna McCargo, a senior fellow at the Clinton Policy Institute, and Julien Rosenbloom, a senior associate at Lafayette Square Institute.

"The revolving loan fund created today lets NJEDA put patient capital behind sales of businesses to their employees and recycles it as loans are repaid," Rosenbloom said. "At a moment when the returns to capital are pulling away from the returns to labor, employee ownership puts New Jersey's workers on both sides of the ledger."

• Related: NJ Needs More Employee-Owned Companies, Lags Behind Other States
• Related: Employee-Owned Business In North Jersey Is Success Story
• Related: This NJ Brewery Was Up For Sale, Now It's Owned By Its First Employee

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