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Suppose that a non-technical individual is trying to start a technical startup. He has not registered his company.
He wants to hire a person to work on the system for him. Will a person agree to work for an unregistered company? If no, how could he hire the employee during the initial phase?
A start-up can't hire someone before the start-up exists.
You as an individual could pay someone to do work for you, ie. you pay them as a freelancer. Once you start your company, you can then offer this person a full time position at your company if you want to hire them.
Not in any jurisdiction I know of. To HIRE someone you must be able to pay all sorts of contributions, and that requires a registration. THere often are special limitations for low income hires (i.e. hiring someone to clean your apartment 4 hours a month), but you run into this limit EXTREMELY fast.
How can you hire someone if you can not pay the legal contributions you MUST pay and can not withhold the withholding tax you have to withhold BY LAW?
It depends on the country, state, and locality and the nature of your business. Also, "registering" means a lot of things.
You may need to do one or more of:
In most US states, you can operate a solo business as a sole proprietorship without registering it - everything is under your social security number, and you're on the hook for taxes and liability. Also, if your field requires licensing you need that. But some localities require business licenses over and above that, you will need to get some local legal advice before proceeding. The US Small Business Association has a guide to what you may need to do by locality.
Here in Texas, you can be a sole proprietorship or form a general partnership without anything except optionally registering a DBA. Unless that's what you want with this first hire, you will need to take further business and tax steps before paying them. Square has a good guide to what those steps look like in the US.
You can also pay them as a freelancer or contractor just as a sole proprietorship/private citizen, making them responsible for all of the tax burden, though there are limits on this.
There is a vast amount of confusion in the question
Suppose A is trying to start a startup. A has not registered a company yet. A wants to hire B. Will B agree to work for an unregistered company? If no how could A hire B during the initial phase?
Again, there is vast confusion here,
It takes like "an hour" and a few pennies to register a company.† So the whole question is a bit pointless and bizarre.
Sure, it's totally commonplace that on Monday, A will say to B "I want to hire you for MegaApp! The company will be registered Thursday! Are you in?!" And A will say "Sure! sounds great!"
Let's say B goes to do a contract or salary job for Microsoft or Apple. Say B starts on the 1st. The pay dates may be the 15th or whatever. Of course, obviously, B "trusts" the established company until the 15th. In contrast...
Let's roll back to point 2. A is just a "normal person" doing a startup, not an established company. So A wants B and B says "Yes!" Hooray! What B will literally say is "Yes! Here's my wire transfer details." (Or ACH, or whatever.) Only a fool would start work at / trust some person with a startup idea, and begin working without money. (If you do hire such a fool, they will be a useless programmer.)
Sure. B may start work for like "a day" until the advance payment arrives. I've often worked for well-known entrepreneurs or the like who I have a long relationship with, and I'll give 'em like "a week" to wire money for some project; set aside such exceptions. In startups you have to pay in advance, so, again, the whole premise of the question is sort of pointless.
Again, harkening back to point 2, sure, you could say to someone, on Monday, "Great! Let's begin! It's after lunch so I'll wire you $5,000 in the morning, and, the company will be registered by Thursday! How's that sound!"
It's completely commonplace that someone, A, doing a startup, at first (perhaps for a few weeks - whatever) just personally makes payments, for example to programmers. Once everything gets rolling and the paperwork is done, etc, someone just sorts out the accounting. For that matter it's perfectly legal and OK to pay to have some MegaApp idea developed, just "as a person" (naturally, this would be a business expense like any other self-employed expense).
Overwhelmingly, in the sort of situation you describe, programmers and designers just work for you as freelancers, ie you just send them money to do things. You're not going to put them on payroll. So it's not complicated.
Unrelated tip -
You mention "technical" software. "Technical" software is Just Like Normal Software but, say, 5 times more expensive.
† Note that anything, whatsoever, you do with software, will cost say $150,000 absolute minimum. So even if it's going to cost "a whole" 5k for legal (for some reason), that is so little money in the world of startups, it means nothing.
