That's true, but the reality is that lots of small start-ups are "doing it wrong" and will be caught eventually [0]. Most jurisdictions have firm differences be

That's true, but the reality is that lots of small start-ups are "doing it wrong" and will be caught eventually [0]. Most jurisdictions have firm differences between a temporary worker (contractor) and an employee. Generally, companies have responsibilities to pay things like payroll taxes for employees and not for contractors. While management and team members might consider them selves BOTH employee and contractor. The legal and tax situation is that those are different employment states and you can't be both. For a recent example see Uber in the UK. It's somewhat a tech industry thing the idea that employees can wander around the world and work from wherever they want - the tax and legal system isn't quite as fluid. [0] statistically the chance of being noticed by the tax authority is pretty small at the start which is why it doesn't happen that much. But, if you start 'employing' tens of people in a jurisdiction and don't have company tax affairs in order then it gets increasingly risky.