LSI research examines the federal and state policy levers, business succession pathways, and capital structures most likely to scale employee ownership, and to route more retiring American businesses into the hands of the workers who built them.
Our View
Employee ownership is a proven strategy to retain domestic ownership and investment while building generational wealth for American workers. For most of American history, a durable route from worker to wealth-builder was to start a business. For families without inherited capital, that route has narrowed. Employee ownership offers another: a share of the company you already work for, paid for out of the company's own earnings, and built over decades of service.
The policy rationale first entered federal law in 1974, through the Employee Retirement Income Security Act, whose ESOP provisions were championed by Senator Russell Long of Louisiana.1 It has drawn co-sponsorship from both parties in every subsequent decade. Most recently, Senators Chris Van Hollen and Jerry Moran introduced the American Ownership and Resilience Act in 2025, alongside Representatives Blake Moore and Lori Trahan, to begin to close the capital gap that limits how quickly employee ownership can expand.2
The outcomes are well-documented. Employee-owned companies generate roughly 2.5 times more retirement wealth for workers than conventionally-owned peers,3 lay off fewer workers in downturns, grow faster, retain more local jobs through ownership transitions, and account for a disproportionate share of the American manufacturing base. The benefits are most pronounced for low- and moderate-income workers, who are otherwise least likely to hold capital assets of any kind.
What has not kept pace is scale. Roughly three million American workers currently hold meaningful ownership stakes in approximately six thousand employee-owned companies.4 Tax incentives for selling owners exist but are unevenly applied. State statutes vary widely. And the capital stack required to finance an employee-ownership transition remains narrow, relying on bank leverage and long-term seller financing that many retiring owners are unwilling to accept.
LSI's employee ownership portfolio works on three fronts. Federal and state policy research identifies the tax, regulatory, and statutory reforms most likely to scale ownership. Accessible data tools make business succession opportunities legible to lawmakers, retiring owners, and investors at the district and state scale. LSI translates the findings into options that lawmakers of either party, community organizations, investors, and other mission-driven actors can act on.
Approximately 2.9 million American businesses are expected to change hands over the next decade.5 Research on the policy, financing, and awareness levers that can route more of them into employee ownership rather than out-of-market sales, closures, or rollups.
The federal and state statutes, tax code provisions, and Department of Labor regulations that govern how and whether employee ownership can scale. Research on the reforms most likely to unlock the next generation of employee owners without new federal spending.
The capital structures that make employee-ownership transitions possible. Research on the bank leverage, seller financing, and institutional capital vehicles most likely to close the financing gap that currently limits how quickly employee ownership can expand, including the bipartisan American Ownership and Resilience Act.
Empirical research on what a share of ownership does for a family over the course of a career: wages, retirement assets, job stability, and participation in company decisions.
Flagship Report
Employee ownership works. Yet every year, thousands of retiring owners sell to strategic buyers or private equity because the financing pathway for an ESOP transition is longer, more expensive, and less well understood than the alternatives. This paper proposes the federal and state financing tools needed to make employee ownership the default option for succession in the American middle market.
Playbook
The United States is entering the largest transfer of business ownership in its history. Roughly 6 million small and medium-sized businesses will change hands by 2035 as their baby boomer owners retire; more than 1 million of them are viable candidates for sale, holding as much as $5 trillion in enterprise value.
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Research Brief
A record number of U.S. business owners are approaching retirement without a clear succession plan. These challenges are especially acute in rural areas of the country, where older owners, older firms, and a limited pool of buyers can make ownership transitions harder and business closures more likely.
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White Paper
Employee ownership works. Yet every year, thousands of retiring owners sell to strategic buyers or private equity because the financing pathway for an ESOP transition is longer, more expensive, and less well understood than the alternatives.
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Research Brief
Sixty-three percent of small- and mid-sized manufacturing owners are 55 or older, and conventional buyers increasingly favor offshoring or closure over continuation. ESOPs offer an alternative that preserves production capacity, protects worker jobs, and delivers measurably higher productivity.
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Research Brief
More than half of business owners in defense, manufacturing, and other critical industries are over 55, and an estimated 900,000 companies face succession risk over the coming decade.
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