Employee equity

Your thinking would seem logical. However, in most cases, giving ownership to employees of a closely-held private firm is usually not a good idea, for two reasons.

First, small minority shares in a small privately owned business are rarely worth anything. Significant equity distribution is more readily achieved with publicly traded stock.

Second, spreading ownership across a group of people who are really employees is a major legal hassle. Laws protecting small shareholders can constrain the company if a single minority stockholder dissents.

It usually is best is to pay your employees a fair wage and don't pretend that a small stake of ownership is going to change how they work or what they think about the company. Profit sharing is sometimes used as an alternative to equity for financial motivation.