Chiming in here:

I’ve been bitten as that employee before. I helped build a startup but my founders chose to not give us stock. We were then acquired and I got pretty much nothing. I felt that I helped build a significant portion of the company but was not granted a portion of that company.

If this employee is valuable you should compensate them. This should come with drawbacks such as sharing the on call rotation among other things.

Edit: I’m not saying that you shouldn’t feel conflicted here, but if this employee is worth making a “partner” and you can’t live without this employee then it might make sense.