IndyBar: Employee Ownership Trusts – Succession Planning with Purpose

By Sonya J. Seeder, Guidon Design, Inc.

When was the last time you thought about the Rule Against Perpetuities? Unless you practice in Trusts & Estates, the answer is likely when you took the bar exam or learned about fertile octogenarians. I was in the same boat until the President & Founder of Guidon Design, Inc. (“Guidon”), Luke Leising, asked me what I knew about Employee Ownership Trusts (“EOT”). I quickly learned that EOTs are a type of Perpetual Purpose Trust (“PPT”), which defy the Rule Against Perpetuities. While PPTs are common for charitable trusts, they are generally disallowed in non-charitable trusts. EOTs, popular in the UK, have recently been gaining popularity in the US as a tool for succession planning through employee ownership. After 10 months of working with a consultant, accountant, and four law firms, Guidon became the first EOT in Indiana in November 2025. Through a partial transaction, Guidon is now both a Service-Disabled Veteran Owned Small Business and employee owned. This transition will allow Guidon to safeguard its legacy, maintain its independence, and share the value it creates with the people who make it possible—its employees.

What is an Employee Ownership Trust? 

An EOT holds a portion of ownership of a company for the benefit of a defined purpose, not an individual beneficiary. Employees do not own shares or a direct stake in the company. The trust agreement sets forth a purpose statement which aligns to the mission and values of the company and, ultimately, benefits the employees. This statement is the Purpose of a PPT. This allows the founder of a business to define their “why” as they plan for succession. For Guidon, the purpose statement ultimately benefits employees, specifically through profit sharing. It’s not that Guidon CAN share its profits; it’s that it MUST share its profits with its employees.

The trust is overseen by a Trust Stewardship Committee (“TSC”) whose fiduciary duty is to the purpose statement. For Guidon, the TSC is made up of the founder, an executive, and three employee representatives. One employee representative is elected annually as staggard terms expire. The TSC participates, as an owner, in decisions about sales, mergers, or dissolution of the company, termination of the trust, and changes to the trust agreement, including the purpose statement. Additionally, there is a third-party trust enforcer who must provide approval for the highest impact decisions to the trust. The TSC also holds a seat on the Board of Directors.

Tax & Estate Implications 

An owner considering becoming an EOT must look at their business structure. Under a partial sale to an EOT, a business can likely remain an S Corp but will have to convert to a C Corp under a full sale. Another consideration is whether the trust will be a grantor or non-grantor trust. Grantor trusts create a tax obligation for the grantor, while non-grantor trusts are taxed at an unfavorable rate. If a grantor trust is used, the grantor must be mindful that trust property can be included in their estate if they continue exercising certain controls. The trust may need to be funded with a seed gift from the grantor. That gift counts towards the grantor’s lifetime gift tax exclusion. While the transition to an EOT is a business decision, an EOT grantor must examine the possible impacts on their personal estate planning.

ESOP v. EOT 

When discussing employee ownership, the conversation typically focuses on Employee Stock Ownership Plans (“ESOPs”) which were recognized by various laws in the 1970s and 1990s. EOTs are different from ESOPs in a number of fashions, including:

• EOTs are governed by trust law in the jurisdiction in which they are formed. They are not governed by ERISA and are not a Qualified Benefit.

• Employees receive a profit share while they are still working for the company; not individual shares paid out when the employee leaves or retires as in an ESOP.

• There are currently no tax incentives for EOTs, but there are for ESOPs.

Why EOT? 

Guidon’s Founder ultimately chose to use an EOT as a succession planning tool because this structure prioritizes long-term stability and employee empowerment over the “highest bidder,” ensures leadership continuity, and aligns with Guidon’s mission of improving lives + empowering people. The EOT provides flexibility and allows Guidon to get profit sharing into the hands of employees to attract and retain top talent. The ability for a founder to still influence control through the defined purpose is a significant benefit to their legacy. It also allows the company, for now, to remain both veteran and employee owned.•

Sonya Seeder serves as General Counsel at to Guidon Design, Inc., a sustainably focused, service-disabled veteran-owned architecture & engineering firm. She is a former IndyBar Board member, is a member of the In-House Counsel Division’s Executive Committee, and is a Distinguished Fellow of the IndyBar Foundation. Seeder is also a graduate of Bar Leader Class XIII. She received her J.D. from the Indiana University Robert H. McKinney School of Law.