I'm currently on a J-1 visa and I understand that I'm not allowed to be paid by any company or organization other than my sponsoring organization. However, is it legal for me to 'work' for a potential startup? At this point, the said startup is not incorporated and is basically a small group of people working on an idea. I am not starting or founding anything and I will not be working as an official employee. Essentially, I will just be doing some technical work in exchange for equity (and no pay). Is this legal? And are there any aspects I should be careful about in particular once the company is (possibly) incorporated as an official business?
Equity is still a pay. Work is still performed, even if you don't get paid. If in the general course of actions a similar employer would have to pay for a similar work to be done by a similar kind of employee, then you're not allowed to do it without a valid EAD.
Once the company comes into existence, they'll get into trouble for hiring an illegal alien (as by breaking the terms of your J-1 you become illegal).
I'm not an attorney, so if you want a definitive legal opinion - talk to one.
No. The issue isn't compensation, it's that you can't work because you don't have a work visa.
Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.