An important part of hiring employees is deciding how to
compensate them. Because of limited capital, startups often
implement equity-only compensation or deferred compensation
arrangements in lieu of regular salaries. However, such
arrangements are unlawful, even if the founder or employee is a
willing participant.
All employees must receive at least an hourly
minimum wage, which varies by location (including higher minimum
wages in cities like San Francisco, Los Angeles, Seattle, and New
York), plus overtime as required by state and federal law. If
employees are exempt (salaried), they must make a minimum salary
amount depending on their exemption, which is also determined by
location. Failure to pay wages to employees (or to defer pay) is a
violation of employment laws, raises tax concerns, and can result
in liability for startups and their founders (as well as officers
and directors). Further, it can jeopardize the validity of
intellectual property assignment,
