Startup Internships: Why They Matter — and What Can Go Wrong

Interns can offer valuable help, but unpaid internships must meet strict legal tests. Founders need to ensure internship programs are structured legally to avoid employment violations.

Why it Matters

Interns can bring energy, curiosity, and new talent pipelines to your startup — but if you don’t classify and compensate them properly, you risk violating labor laws and creating long-term legal liability.

Founders Checklist

Determine whether the internship is paid or unpaid
If unpaid, ensure it meets Department of Labor’s “primary beneficiary” test
Set clear learning goals and mentorship plans
Avoid assigning mission-critical work without compensation
Sign an internship agreement and track start/end dates
Consider long-term hiring and conversion pipelines

Founder Fails

Treated unpaid interns like full-time developers
Promised job offers without budget or plan
Skipped paperwork — no offer letter, agreement, or end date
Denied minimum wage > faced labor complaints or back pay

When to ask for Help

Before hiring unpaid interns
If you’re providing benefits or stipends
When designing intern job descriptions or expectations
If interns are doing work similar to employees
To comply with academic program requirements

Frequently Asked Questions

Q: Can I have unpaid interns?
A: Only if the internship is primarily educational and benefits the intern more than the company. Otherwise, it must be paid under federal and state wage laws.

Q: What kind of work can interns do?
A: They can shadow, assist, or explore — but shouldn’t replace employees or drive core product features unless they’re compensated.

Q: Do interns get equity?
A: Rarely. If they’re unpaid, avoid offering equity to sidestep employee classification issues. Consider a post-internship equity grant if they convert to full-time.

Q: Are startup internships worth it?
A: Yes — especially for recruiting, marketing, and early ops. Just make sure it’s structured, valuable, and legally sound.