When starting a new job, we typically think about two things: our role and our compensation. But there’s so much more to consider, especially for startups.

In a recent episode of the Founder Shares podcast with Ashley K. Pittman, employment law attorney at Hutchison, we dug a little deeper into the life cycle of the relationship between an employer and their employees. From independent contractors to full-time employees, there are a lot of different considerations for founders as they fill roles in their companies.

While new startup employees need to look for people who believe in the business’s products or services, they also need to find people who believe in the founder. From there, founders have to figure out exactly how to classify their new hire within their company.

“I’ve found that the main thing that drives that decision for founders is ‘I don't have cash to pay them a salary or wages,’” Ashley said, “so they're a contractor, and I'm paying them in stock options. That's fine as long as the relationship actually is that of a contractor.”

And there are different rules for different classifications of employees, and the consequences for not following them can be expensive.

“If you classify someone as an independent contractor and pay them only in equity because you don't have any cash yet,” Ashley said, “and then it turns out they were misclassified and they were actually an employee, they could be entitled to back pay, back wages, potentially benefits if that was...

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