How Important Are Job Titles in a Small Company?

When I first started my company, titles were meaningless. But I've got 10 employees now, and I expect my staff to double in the next year. How important are titles in a small company?

In a growing business it's especially important not to clutter up the organization with a ton of titles. Despite the trend for silly titles in Internet start-ups, fancy titles can actually be counterproductive rather than motivating. There should be only a few titles that clearly reflect what people are doing. It's also important not to create nuances in titles that allow people to pull rank. Using modifiers such as "Senior" or "Associate" further confuses things. It's OK to use titles, but keep them short and simple.