A common strategy to try to manage costs of a new business is to retain workers as independent contractors (sometimes misleadingly called “1099 employees”), rather than as employees. However, not all workers can be retained as independent contractors.
In most states, some employees—regardless of any contractual obligations—owe a duty of loyalty to the employer, which is similar to a fiduciary duty, but not identical.
Poorly written (and unwritten) commission agreements have spawned a plethora of litigation. Commissions should be carefully thought-out and set forth in a clearly written commission agreement signed by the company and the C-Level executive.
In the start-up phase of a business, cash flow is often a difficult issue. R&D, equipment outlays, leasing and other costs often strain the finances of a new business.