When the federal government made the Employee Ownership Trust (EOT) $10 million capital gains tax exemption permanent in April 2026, it was big news and rightly so. EOTs deserve the spotlight. But in the excitement, it’s easy to overlook a broader truth: employee ownership in Canada is much bigger than any single model.

From construction giants to solar companies to a Quebec cooperative crafting Carnival mascots, Canadian businesses have been sharing ownership with employees for decades. The EOT is a powerful new tool in the toolkit, but it’s one of four distinct models available to business owners today. And depending on your goals, your industry, and your timeline, a different approach might serve you better.

Here’s a look at the full picture.

McElhanney, Canada’s oldest employee-owned engineering firm, has been doing this since 1910. PCL Construction, EllisDon, Chandos, and more have all applied employee ownership to their advantage for decades, before the EOT framework existed.

What they had in common wasn’t a specific legal structure. It was a belief that the people who help build a business deserve a stake in it. Today, Canadian owners have more tools than ever to act on that belief.

1. Employee Ownership Trust (EOT)

The newest model and, right now, the one with the most favourable tax treatment. In an EOT transition, the owner sells a minimum of 51% of shares to a trust and the employees become the trust beneficiaries, not direct shareholders. The permanent $10M capital gains tax exemption makes this a financially compelling option for qualifying sellers.

EOTs work best for mature, profitable, cash flow stable businesses. Transitions typically take a year or more and require financial planning, including financing the sale. The typical first step is to reach out to a plan designer with EOT expertise.

2. Employee Share Ownership Plan (ESOP)

ESOPs are one of the most flexible forms of employee ownership. Employees purchase or earn shares over time through payroll deductions, bonuses, or vesting arrangements. Plans can cover a handful of key leaders or extend to the entire workforce.

ESOPs can start as minority ownership and grow into full employee control. They are a strong tool for owners who want to reward and retain their people, build a culture of ownership, and transition gradually on their own terms.

3. Worker-Owned Cooperative

In a worker cooperative, each member buys one share and holds one vote, regardless of tenure or pay. Profits (called surplus) are distributed based on participation, typically hours worked. This model prioritizes workplace democracy and equitable wealth-sharing above all else.

Co-ops are an especially strong fit for deeply collaborative teams who want not just ownership, but active governance roles.

4. Phantom Equity Plan

Phantom equity mirrors the economics of ownership without issuing actual shares. Employees receive cash payouts linked to enterprise value, profit growth, or a liquidity event, but the ownership structure stays the same and employees do not own equity in the company.

For some owners, phantom equity is the starting point: a way to create alignment and retention while preparing for a fuller transition through an ESOP or EOT later. For others, it’s a permanent tool for rewarding key leaders without the complexity of issuing shares.

There is no single right answer. Business owners can choose from EOTs, share ownership plans, worker cooperatives, phantom plans, or a hybrid of several, depending on their business, their goals, and their people.

What they share is this: every model offers a path to a more resilient, values-aligned business. One that keeps ownership local, rewards the people who helped build it, and keeps Canadian businesses Canadian-owned.

Want to explore which model might be right for your business?

→ Connect with a trusted EOC service provider to discuss your options.

→ Attend an upcoming EOC webinar or Conference.

This post is for general informational purposes only. Always seek qualified legal, tax, and financial advice.

In his recent address at Davos, Prime Minister Carney spoke boldly about what Canada must do to succeed in a more uncertain global economy: strengthen domestic capacity, keep value creation at home, and ensure growth works for Canadians.

That message lands at exactly the right moment.

Canada is not short on good businesses. We are facing a different challenge altogether: a looming succession crisis that will determine who owns our economy, where wealth flows, and whether communities remain resilient in the years ahead.

There is a practical, proven solution already on the table. It is employee ownership.

A succession crisis hiding in plain sight

Over the next decade, more than $2 trillion in Canadian small and medium-sized business assets are expected to change hands. At the same time, 75–80 percent of small business owners plan to retire or sell, yet only a small fraction have formal succession plans in place.

When succession pathways are limited, outcomes are predictable. Viable businesses are sold because it is easier, not because it is better. Ownership and decision-making move away from communities and often into the hands of third, sometimes foreign, parties.  Jobs become more precarious. Long-term investment gives way to short-term extraction.

If Canada is serious about strengthening its domestic economy, succession can no longer be treated as a private issue. It is a national economic one.

Why ownership matters to economic resilience

Ownership is not an abstract concept. It shapes incentives, investment decisions, and resilience over time.

International evidence from the United States and the United Kingdom shows that employee-owned companies are more productive, more stable, and more resilient during downturns. They are less likely to relocate, less likely to fail, and more likely to reinvest locally. Workers in these companies build wealth, earn more over time, and stay engaged in the success of the business.

This is not theoretical. The United States now has over 6,000 employee-owned companies, generating more than $2 trillion USD in worker wealth. The United Kingdom has nearly 3,000 employee-owned firms, built on permanent policy support that made employee ownership a mainstream option.

Canada has begun to follow this path, but only just.

Employee Ownership Trusts: a made-in-Canada solution

Employee Ownership Trusts (EOTs) were introduced into Canadian law in 2024 to provide a clear succession option for privately held businesses. Under an EOT, a business is sold to a trust that holds the company on behalf of its employees. Employees do not buy shares individually or take on personal financial risk. Ownership transfers gradually, using future company profits to repay the former owner.

The early results are promising. Canada’s first EOT transitions have already created over 900 new employee-owners, keeping strong companies locally rooted and financially stable.

Just as importantly, an ecosystem is forming. Financial institutions are developing EOT expertise. Advisors are building practices around employee ownership. Researchers are beginning to track outcomes. This is how durable economic models take hold.

What is holding this progress back is not demand or viability. It is policy certainty.

The simplest economic win Canada can take

Selling to employees is not the easiest option for a business owner. EOT transactions typically involve deferred payments and additional complexity compared to third-party sales. That’s why, and as international experience suggests, employee ownership scales best when supported by clear, stable tax policy and incentives that recognize the added risk owners take on.

Canada’s current $10 million capital gains tax exemption for EOT sales is temporary, set to expire at the end of 2026. Evidence already shows that this short timeline discourages business owner adoption. Succession planning often takes more than a year. Temporary incentives do not align with long-term decisions.

Making the incentive permanent would be a high-impact policy choice. The federal government has projected the fiscal cost at roughly $80 million over five years, a low-cost intervention to economy building. In return, Canada would retain domestic ownership, protect existing jobs, strengthen productivity, and build worker wealth without creating new programs or bureaucracy.

Economists suggest Canada could see roughly 60–95 EOT transitions per year in the early years, with thousands to potentially over 10,000 employees per year becoming employee-owners.

That is not a niche policy outcome. It is a structural economic shift.

A Canada-strong choice

In a world where global capital is more mobile and economic shocks more frequent, resilience matters. Ownership matters. And succession matters.

Employee ownership is not about ideology. It is about aligning incentives so that growth, stability, and prosperity reinforce one another. It keeps businesses Canadian. It empowers workers to share in success. It anchors investment in communities where it belongs.

As Prime Minister Mark Carney argued at Davos, strengthening Canada’s domestic economy requires practical choices that deliver real results. Making employee ownership a permanent, mainstream succession pathway is one of those choices.

Canada has already laid the groundwork. The opportunity now is to finish the job.

Like you, we know the path forward does not have to be complicated.

If a strong, resilient Canadian economy is the future you want to see, we invite you to add your name to our collective letter calling for permanent support for Employee Ownership Trusts.

Sign the letter and help build a Canada-strong economy.

As business owners across Canada plan their exits, a new research institute is stepping in to ensure those transitions strengthen, not hollow out, our economy and communities.

A Turning Point for Canadian Businesses

Across Canada, a quiet but consequential shift is underway. Three in four Canadian business owners are planning to exit their companies within the next decade. For many, this is the culmination of a lifetime of work. For the country, it represents a moment of real risk, and real opportunity.

Without thoughtful succession pathways, business exits can trigger cascading effects: local jobs lost, community anchors sold or shuttered, and Canadian companies absorbed into foreign ownership or stripped for parts. The uncertainty is not abstract. It shows up in regional economies, municipal tax bases, and the long-term stability of families and workers.

At a time of economic volatility and global pressure, Canada needs solutions that keep businesses thriving, rooted, and resilient. That means policies that work, and policies require evidence.

This is where research becomes essential.

Why Data Is the Difference

Good intentions alone cannot sustain an economy through mass ownership transition. Policymakers, advisors, and business leaders need credible, Canada-specific data to understand what works, what scales, and what protects long-term value.

Employee ownership has emerged as a promising succession model; one that can preserve legacy, retain jobs, and share prosperity. But until now, Canada has lacked a coordinated research engine dedicated to understanding its full potential.

That gap is what led to the launch of the Employee Ownership Research Institute (EORI).

Introducing the Employee Ownership Research Institute

Newly launched at Queen’s University’s Smith School of Business, within the Centre for Entrepreneurship, Innovation and Social Impact, EORI exists to deepen Canada’s understanding of employee ownership and translate research into real-world impact.

Its mission is clear:

• To generate rigorous, Canada-focused research on employee ownership
• To inform better policy, practice, and professional guidance
• To support succession solutions that benefit owners, employees, and communities alike

“Canada is facing a once-in-a-generation transition of business ownership,” says Elspeth J. Murray, Director of EORI. “If we get this wrong, we risk losing the economic and social fabric that small and mid-sized businesses provide. If we get it right, we can build a more resilient, inclusive economy.”

What Success Looks Like

EORI’s work is designed to move beyond theory and into application. The institute focuses on four interconnected outcomes:

• Research: Building a robust, evidence-based understanding of employee ownership models in the Canadian context
• Collaboration: Connecting researchers, policymakers, practitioners, and business leaders
• Education: Equipping advisors, owners, and decision-makers with practical insights
• Engagement: Advancing national dialogue around succession, ownership, and economic resilience

“Our goal is not just to study employee ownership,” Murray explains. “It’s to ensure that the research actively informs decisions being made right now; by business owners, by governments, and by those advising them.”

The Leaders Behind the Work

EORI brings together an interdisciplinary group of respected scholars and practitioners, including:

Elspeth Murray, Director, Associate Professor, Queen’s Smith School of Business

Lorin Busaan, Research Fellow, PhD Candidate, University of Victoria

Simon Pek, Fellow and Board Member, University of Victoria

The Advisory Board includes globally recognized leaders in employee ownership and economic inclusion, such as Joseph Blasi, Mike Fotheringham, John Hoffmire, Melissa Hoover, and Jon Shell, ensuring the work is both academically rigorous and grounded in real business experience.

The stakes extend far beyond individual companies.

What unfolds over the next decade will shape more than balance sheets. It will influence whether business owners can exit with confidence and integrity, whether employees experience stability, voice, and shared success, and whether advisors and practitioners have credible pathways to guide increasingly complex transitions. These choices will also inform how policymakers shape Canada’s economic future, and whether communities can continue to rely on locally rooted enterprises as anchors of jobs, investment, and identity.

“My hope,” says Murray, “is that five or ten years from now, employee ownership is not seen as niche or experimental, but as a normal, well-understood option in Canada’s succession toolkit.”

A Shared Research and Collaboration Agenda

EORI’s work intersects closely with ours, Employee Ownership Canada, the national voice advocating for employee ownership across the country. While we focus on ecosystem development, education, and policy engagement, EORI contributes  research  capacity that helps deepen understanding of how employee ownership functions in the Canadian context.

Together, we are already collaborating in practical ways including efforts to:

• Develop a shared definition of employee ownership in Canada, and
• Build a clearer picture of the number, distribution, and characteristics of employee-owned businesses nationwide.

This work advances a more evidence-based understanding of the current state of employee ownership, information that is essential for business owners, practitioners, and policymakers navigating succession and economic transition.

The Call to Action

This work is urgent, and it is collective.

EORI was made possible by early donor leadership and champions who recognized the stakes of Canada’s succession moment. Continued progress will require:

• Sustained donor support to expand research and engagement
• Joint advocacy to ensure policy keeps pace with evidence
• Active participation from businesses, advisors, and institutions

Employee ownership will not scale on its own. But with strong data, coordinated action, and shared commitment, it can become a cornerstone of Canada’s economic future.

The transition is already underway.

The question now is whether Canada will meet it with clarity, collaboration, and courage.

If you support a strong, resilient Canadian economy and want to learn more about employee ownership as a path forward, visit employee-ownership.ca to learn more and get involved.