My two co-founders and I signed our first company into existence on a hot summer day in 2008. Prior to signing the document, we had to decide what our titles would be. Our lawyer assured us that we could give ourselves any titles we wanted and it would not have an impact on the legal process. We thought it would be fun to sport executive titles, so we each chose a grandiose executive title and then returned to our shared apartment and kept hacking.
After several years at both companies, only the CEO title stuck. Although we remember what job titles we each picked, they ended up being largely unimportant.
Size Does Matter
Organizations give titles to members to help people outside the organization understand who they are speaking with. When you get interviewed for a job, you want to make sure you aren't talking to a sales associate, you want so-and-so from HR. When a member of the press deals with a company, speaking with the CEO lends more weight than if the representative is a summer marketing intern.
But the orienting power of a title breaks down when the organization being represented is small. If you are being interviewed for a position at a 5 person startup, it's less important who you talk to because you can be more certain you are talking to someone of importance. Similarly, if a member of the press talks to one of a three person founding team, it matters less what title they chose and more that they are one of the co-founders.
For small startups, job titles are less important, if not entirely meaningless--except for the title of CEO.
So why does the CEO badge remain important even at a tiny company? At both of my companies, we made it clear to our customers and business partners who we were, and we didn't made any attempts to look larger than we are. So at least in theory, an email from any one of us should have carried equal weight. Internally this was true, but externally, it remained useful to call one person the head honcho. Even in a super-small startup, it helps clarify to outsiders who the organization recognizes as the leader or point of contact.
None of us made business decisions without unanimous consent, we all checked each other's commits, and we all read each other's support emails. But startups deal with thousands of people in their lifespan and it's easier on everybody to avoid explaining egalitarian cooperation and simply point to one guy and say "he's boss."
This doesn't mean, however, that tiny startups can get away without a clear internal division of labor. Titles need not be assigned, but somebody has to know it's their job to file this year's tax return on time. At both of my startups, I was referred to as "head businesser." Nick was a "programmer," and Scott was a "programmer and accountant." The fact that Nick and Scott were labeled CTO and CFO on paper was only superficially important. Their understanding of their roles at the company, however, was of paramount importance.
If you are starting a startup and are wondering whether you and your cofounders should have titles, I would give this simple advice: decide who the CEO is and stop worrying about other three letter acronyms. Incidentally, this is exactly the advice that YCombinator tells it's founders.