What amount of financial trouble is normal for a small business?

I work for a well known creative firm in town - they hired me on a 1099 basis for a small trial and then promised a salary after 2 weeks. Two months later, I am still 1099 (even though I'm working full time)...I have found out that most employees (there are only 4) don't even take a paycheck because they don't need it and the company perceives anyone who wants to be paid regularly as "selfish and a bother."

They don't pay me regularly - most of the time there's no money to pay bills because the owner has spent it on his personal bills and shopping.

I brought the problem up with my boss and he said that "we're a small business - cash flow problems are normal...you can change things if you want to take the initiative."

Is this situation normal?? They have been in business 12 years, so they are not in the startup mode anymore. Should I stick it out and try to change it and have a great success story for my portfolio or accept that I have different values and move on?

Sounds like this company is using you and could well be in violation of the labor laws. Suggest you either have this situation spelled out in detail to you as you would like to eat, or get out of this job. If you do be sure that you are paid or take them to your state's employment office.

I suppose there were no conditions upon employment that you "may or may not get paid", so what they are doing is illegal. It is not a problem of yours whether they cannot afford to pay you, it is their responsibility as a business who has employees. I'd get them investigated, and get what they owe you.

Unless you are a partner it isn't your problem. If they can't manage a business they can't expect employees to finance them.
I walked out of a job because it was a month after overtime pay wasn't paid. The boss said he was 5 house payments behind and didn't get paid either. I told him he wasn't supposed to get paid he got the leftover money after we were paid. I then decided to go home so told him to call when he got money. He borrowed money to make payroll.