Be careful what you give the person who has been with you fourteen years
Almost every family business has this person. They are not family. They have been there longer than most of the family. And at some point you decide they deserve a piece of it.
The instinct is right and the usual execution is wrong.
"Give someone equity in your company. You might just be creating a massive taxable event on something that they have no liquidity from, and they might reject it just because the structure was bad."
Read that carefully, because it is worse than it first sounds. You give your general manager 5% of a company you are proud of. Depending on how it is structured, they may owe real tax on receipt, on a number they cannot sell, in a company that has never paid a distribution and may not for years.
So the reward you intended arrives as a tax bill.
And here is what usually happens next, and it is the part that stings. They say no, or they say thank you and quietly resent it, and you conclude they did not appreciate what you offered. They did. The structure was bad. Those are different problems and they get confused constantly.
What the person usually actually wants
Worth checking before you design anything. In my experience it is rarely the equity itself. It is usually one of four things:
Three of those four do not require equity, and the fourth one is free.
Four structures that usually fit better
Phantom equity. They get the economics of ownership without the ownership. Paid on a liquidity event or on a formula. No tax on receipt, no cap table, no minority shareholder with rights you did not think through, and no complication when the second generation comes in.
A profits interest, if you are an LLC. Structured properly they participate in growth from today forward, and there is generally no tax at grant because there is nothing to tax yet. Get this one drafted by somebody who does it regularly, because the details are the whole thing.
A gross revenue royalty on the piece they actually drive. If your GM runs the service division, pay them a percentage of that division's top line. It is simple, it is on the bank statement, and it ends the argument about how overhead gets allocated before that argument starts.
A stay-and-sale bonus. A specific dollar amount, paid if the business sells and they were still there. One page. This is the one most owners should have written years ago and have not.
The timing thing nobody mentions
Do this before you are in a process, not during one.
A buyer looking at your company sees an unretained, uncontracted key person as a risk they will price. Either you handle it on your terms in a quiet year, or the buyer handles it on theirs during diligence. Only one of those versions is good for someone who has been loyal to you for fourteen years.
And the family angle, which is the real reason this page exists. Your key non-family person and your next generation are going to have to work together, possibly for a long time. Whatever you give one of them, the other one is reading as a signal about where they stand. Design it with both of them in the room in mind, even if neither one is in the room when you decide.
Who is the person in your company that this page is about? Most owners knew the name before the end of the first paragraph.