I do a little consulting work on the side and am working with a startup that wants to issue equity to key employees. I am advising setting up as an LLC with S corp election (not sure if that matters for my question, but just for context).

It seems to me that the purpose of equity is to reward employees in the event that the company ever goes through a transaction where shareholders receive a windfall. I don't see this company ever getting to that point and the equity could cause more problems than it's worth.

There are easier and more efficient ways to reward key employees (bonuses) and employee agreements could even be written to cover a sale so the employee receives the same windfall.

Is equity just a given in today's startup environment?