The team is by far the most important asset when it comes to a company, and especially when you are a small company just starting off. Your team can make or break your company. With that said, I know that it is difficult for startups at first to hire employees because of the cost, but investing in a team and the legal structure of the company and the team is very important. Today I am writing an article regarding the most common misconceptions for founders and employees at startups.
Founders as employees
Question: Can founders be employees? What legal implications should we look for if we would like to have founders as employees? What should the equity split for founders be?
Fajer: It is very common to have founders as employees, CEOs, COOs, CFOs and so on. There are many factors to consider when having a founder/partner as an employee – here are a few:
1. If a founder is getting shares because he will be working for the company, then you need to make sure the shares are given after the work/time period of work is completed. This is usually under a vesting schedule – a schedule that states when a shareholder receives his share.
2. A point that founders always overlook, is if they should receive a salary or not, and how much should that salary be. This is especially important if you are looking for investors in the future. You need to know as a founder whether you would like to continue being an employee in the company in the future. Also you need to make sure that all your documents are done professionally and are legally correct for future investors.
3. You need to consider an equity split carefully – it may sound like the best option is to just split the equity equally with the founders, but that shouldn’t be the case. Instead, the equity split should be studied carefully, considering what each partner may bring to the company.
Question: Can I legally hire part-time? As a startup we currently cannot afford to hire full-time employees.
Fajer: There is no mention of part-time employees under the Kuwaiti labor law currently or any option to register an employee part time under the ministry of labor and social affairs. With that said, in my opinion, it is not illegal to hire someone part-time or to pay someone to complete a task or provide you with a service. The most important thing though is to make sure that the employees are receiving their full rights under Kuwaiti labor law. Just because the employees are part-time, this doesn’t mean you can keep their passports or not pay them for any additional work that they do.
I hope the above helped. If you have a concern, please email us at firstname.lastname@example.org
By Attorney Fajer Ahmed