Top priority should be given to protecting your intellectual property and workforce through the use of noncompetition and nonsolicitation agreements, intellectual property development agreements and other restrictive covenants. The type of protection needed will depend in part upon the particular industry and industry norms. Compliance with Wage and Hour Laws. While it is easier to pay everyone a salary, it's important to realize that under the various federal and state wage and hour laws, some employees may be entitled to overtime pay. Failure to properly classify employees, and otherwise comply with the requirements under the wage and hour laws, could mean an obligation to pay thousands of dollars in back pay plus penalties should the government conduct a compliance audit, an employee realize that he or she is owed overtime pay or counsel conducting due diligence for a sale or IPO raises the issue.
Many new companies use equity to attract, retain and reward employees.
While giving away options may lure talent, it may scare off investors if too much of the company's equity is issued to people who will not be making significant future contributions to the company. Rather than doling out options haphazardly, an emerging company should carefully develop an executive compensation plan which balances its desire to recruit and retain top talent with the needs of its investors. Use of vesting schedules and stock repurchase options can help accomplish both parties' goals. Depending upon the size of your workforce, you will be subject to a variety of federal, state and local statutes and regulations. As your business grows and you hire more employees, the number of laws with which you are required to comply increases.