S Corporation vs. C Corporation ESOPs

ESOPs are found in both S and C corporations, but most are in S corporations, whose pass-through tax structure combined with ESOP tax benefits make it possible to create wholly employee-owned, tax-exempt, for-profit enterprises. As of 2025, we estimate that among ESOPs in privately held companies (which are over 90% of all ESOPs), 2,033 are in C corporations, and 3,983, or 66%, are in S corporations. A C corporation may adopt an ESOP, use the C tax benefits, and later elect S status.