4 Vital Legal Agreements All Startups Should Have in Place

When getting a business off the ground, one common mistake business owners make is not establishing a solid legal foundation to protect their company from unforeseen situations and circumstances. The most effective and efficient way to provide this legal bedrock is by putting a set of key legal agreements for your startup in place.

Gleaned from years of business experience and advice from seasoned and highly successful entrepreneurs, we’ve outlined the core four legal documents that a company’s founders should put into place as soon as your business “idea” evolves into a reality.

When starting a business, it’s crucial to select the proper business entity structure in order to maximize tax savings and minimize personal liability. Some of the most popular entity structures include sole proprietorships, general and limited partnerships, C corporations, S corporations and limited liability companies (LLC or even an LLC taxed as an S-Corporation).

Once you choose the most advantageous structure, you should—and are sometimes legally required to—draft the proper entity agreements to lay the groundwork for how the business will be governed and operated. Different entity structures require different types of agreements. For example, C corporations require corporate bylaws, while LLCs use an operating agreement.

These agreements are legal documents that define each shareholder or member’s rights and responsibilities, along with establishing the provisions for running the company, both on a daily basis and in the event one person dies or becomes incapacitated—as well as if the company dissolves. Moreover, these agreements also outline how business communications will be handled, along with how disputes will be resolved.

You may also have a shareholder’s agreement or a partnership agreement, if there are multiple owners of the business, where you want to further define the relationship among the owners.

To avoid any conflicts, these agreements should be created and signed by all parties as soon as the company is launched. As your Creative Business Lawyer®, we can advise you on the entity structure that’s best for your business as well as draft entity agreements to ensure maximum protection.

When launching a new business, you should make sure that all of the intellectual property (IP) brought into the company by its founders before startup, as well as any IP that’s subsequently created by owners and/or employees once the business is operational, is owned by the company, not the individuals. Transfer of IP ownership from individual to the company is done using intellectual property assignment agreements.

These agreements “assign” the company with complete ownership rights to all intellectual property assets—patents, trademarks, and copyrights—that are used to conduct business. Such agreements are typically required by most venture capital investors, and they also help protect the company from competitors and/or trolls looking to steal your ideas or products.

As your Creative Business Lawyer®, we can help you draft IP assignment agreements, so you can retain total control of all IP assets that your business relies on to operate and grow.

Unless you plan on running the company all by yourself, you should create comprehensive employment contracts and offer letters before hiring new employees. These agreements clearly lay out the terms and conditions of employment, so your team will understand exactly what’s expected from them.

Employees should be required to sign these documents, providing evidence that both parties are aware of the employment relationship’s scope and conditions. Employment contracts should also include any non-disclosure agreements (NDA) and/or non-compete agreements you require to ensure your company’s trade secrets and/or proprietary systems and products don’t fall into the hands of competitors.