FOR OWNERS
A ready market to sell their stock; an incentive for improved worker productivity as employees become owners; an employee benefit that might attract and retain workers in a tight labor market.

FOR EMPLOYEES
Deferred taxes on stock gains until retirement, as with other pension plans; improved morale.

FOR COMPANIES
The ESOP is exempt from taxes. If an ESOP owns 30% of a company, for example, 30% of the earnings go untaxed. The enhanced cash flow should increase the value of the company's shares, and dividend payments can create a pool of cash to buy additional shares or to pay off a loan.

FOR C-CORPORATIONS
Traditional C-corporations with an ESOP may find it advantageous to become an S-corporation. The benefit is potentially huge if the ESOP owns 100% or so of the company, since taxes would be reduced to zero. The trade-offs, however, become a lot trickier (and the benefits less compelling) if the ownership share is under 70% to 80%.