An ESOP is a type of qualified, defined contribution plan designed to invest primarily in the stock of the sponsoring employer. ESOPs are “qualified” in the sense that the ESOP’s sponsoring company, the selling shareholder and participants receive various tax benefits. ESOPs are often used as a corporate finance strategy to create a liquid marketplace for closely held stock which provides a viable tax advantaged exit strategy for shareholders under Section 1042. A common misconception is that by installing an ESOP an owner has to give up control of their company to their employees, which isn’t the case. A properly structured ESOP allows an owner to sell some or all of their privately held stock, creating liquidity, while still maintaining 100% control of the company.