On July 21, Governor Hochul signed Senate Bill S.5261B into law, correcting a longstanding inequity affecting New York State (NYS) architecture and engineering (A&E) firms and their use of employee stock ownership plans (ESOPs). Under the legislation, A&E firms in the state can now be up to 100% ESOP-owned by non-licensed professionals.
Unlike their counterparts in neighboring states, NYS A&E business owners have been limited in their use of ESOPs due to a state mandate that required 100% ownership to be held by licensed design professionals, or more than 75% ownership if the firm has applied to be a design professional corporation. This limited both third-party and internal candidates for succession planning and M&A purposes.
Effective in 24 months, this new law will put A&E firms on a more level playing field as they plan for the sustainability of their NY businesses. ESOPs are known to yield many benefits, including employee retention, increased productivity and more flexible succession planning options.