Among the new laws taking effect in California this year is the California Employee Ownership Act, which encourages small-business owners to give their employees a stake in the company. Passed with unanimous support, the law sets up an employee ownership hub in the governor’s office to support companies that want to pursue this business model.

The state currently has only 100 employee-owned companies. But research from the nonprofit Project Equity identified about 350,000 business owners near retirement age who might want to consider the idea.

And they can look to Proof Bakery in Los Angeles for proof that the model works.

When chef Na Young Ma opened the bakery in 2010, she wanted it to be a place where workers could really feel invested in the business. “It definitely takes everyone who’s there to make it work,” she said. “We kind of all work together and assist each other.”

But it took more than a decade to make that dream official. In late 2021, Ma sold the business to the two dozen or so staff as a leveraged buyout — a loan that gets paid back with the profits of the company. Proof Bakery is now a worker cooperative, where the staff controls a majority of the board.

“It’s an old model, but we don’t really have a lot of examples in the U.S.,” Ma said. “So we definitely needed help.”

They got help from Project Equity, which also co-sponsored the California legislation. The organization helps businesses navigate legal requirements, secure financing and train employees...

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