As you put together you team, it is natural that discussions about payment will come up. As well they should. Anyone that gives you value should be compensated for it. Since most small businesspeople don't start with money to throw around, so sometimes you have to get creative. I'm going to cover a few of them here to get you started.
One of the oldest forms of compensation is bartering. It still works today. There is one point that you should be aware of. Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another's products or services - you will have to report the fair market value of the products or services you received on your tax return. Of course, you can also expense any services you provide in exchange. For a complete discussion on the tax consequences, search on bartering at the irs.gov web site.
You can hire the people you need. You can hire them as either employees or contractors, but you need to understand the legal differences between them so you don't run afoul of the Internal Revenue Service. An employee is someone that works for you who you give direct instruction to. This means that you tell them when they are going to work, where they are going to work, and how they are going to work. You will be responsible for paying half of their payroll taxes and maybe other costs such as unemployment insurance and certain benefits such as pensions.
An independent contractor is someone you hire to do a task. You can tell them when the task is to be done, but not when to do it. You can tell them what the final result needs to be, but not how they have to accomplish it. They have the responsibility of paying all their own payroll taxes and other costs. Some unethical employers will hire people as contractors and not tell them they are responsible for the taxes as the end of the year. If they should complain to the IRS about this, the IRS will audit you and reclassify the income, handing you a bill for taxes and penalties. This is another reason you may want to consult a tax advisor specializing in small businesses.
The third way is to offer the person equity, or partial ownership in your company. There are benefits and flaws to this for both sides. For the personal you are giving equity to, it could end up to be worthless if the company fails, so they are taking a chance on never receiving a return for their work. On the other hand, if the startup is successful it could be worth a lot of money in the future. For the business owner, it means that you would not have any up-front cost and they would tend to work harder because they had a stake in the company. On the downside, if that person becomes a detriment to your business, if could be very expensive to buy them out later. The best advice has always been, Don't give away what you can hire.
Another way is to pay someone both cash and equity. This is the best of both worlds for a partner or employee. The person may get paid a little less up front, with the possibility a greater reward down the line.
The last compensation method we will discuss here is to give a bonus on specific criteria. In some industries like sales, the majority of one's compensation is paid as bonus. Many companies pay bonuses to different departments meet certain criteria. The problems occur with companies create incentive for managing budgets and keeping expenses down. This actually holds the business back by rewarding people for keeping the status quo. Bonuses should be structured so that they support interdepartmental interdependence. For instance, the accounting department gets rewarded if it comes up with an idea that the sales staff can use, and the sales staff gets rewarded if it keeps the cost of sales down.
Which direction you should take is definitely something that your mentors, accountants and tax advisors can help you decide.