It depends quite a bit on what the terms are. I spent a few years doing consulting/contracting for early to mid-stage startups, and every one of them had slightly different terms.

Most startups in my experience, however, prefer to have full-time employees. The opportunity cost of having an employee leave the project in the early phases is often times devastating, and contractors/consultants are more likely to jump ship if something more lucrative comes along. The same can be said of "real" employees, but you're often in a better position to make a more compelling offer (i.e. stock, options, benefits, etc.) to the latter rather than the former.