10 Legal Documents to Kick-start Your Startup

by | Jun 10, 2015 | Financial Services

At a certain point, you’re going to get to the stage of startup development where the legal documents will go whizzing by faster than … well, fast. Here are ten basic, but important; documents or agreements you may wish to familiarize yourself with before you read the fine print. You may not need all of them, but it’s good to understand what they are.

1. Founder’s Collaboration Agreement
This agreement helps clarify things like shareholder stake and level of effort that’s expected from each founder over the course of the business. These agreements are especially important for startups that haven’t formed yet or who don’t have a shareholder’s agreement yet.

2. Non-disclosure Agreement (NDA)
An NDA helps you protect trade secrets and other competitively sensitive information. NDAs can be highly negotiated, but it’s good to have a basic form to use for ordinary business transactions that require a little bit more discretion.

3. Certificate of Incorporation & Bylaws
These are the basic documents which form the charter documents of a corporation. The Certificate of Incorporation is filed with the appropriate agency within a state creating a legally recognized corporation. Some states may call this document the “Articles of Incorporation”. There may also be slightly different names for different entity types, such as “Articles of Organization” for limited liability companies. Bylaws are essentially rules that a corporation adopts in order to govern itself; the equivalent for limited liability companies is the Operating Agreement.

4. Business Terms and Conditions
This sets out your terms of trade, and the purpose is to protect your rights. Business terms and conditions are usually provided to your customers so they know what to expect in their dealings with you.

5. Independent Contractor Agreement
Most startups rely on independent contractors to add bench strength for specific tasks, either to bring in specific expertise the founders don’t bring to the table, or simply to add a pair of hands for specific projects. A contract that explicitly defines the nature of the contract relationship will keep things clear between you and the contractor. Be careful to properly classify staff as independent contractors vs employees. There may be additional regulations applicable to employees that you have to comply with and simply calling someone an independent contractor does not mean that they are not actually an employee.

6. Website Terms of Use
These aren’t necessarily required by law, but it is considered prudent self-protection to ensure you have a good, legally-reviewed set of terms of use for your website. In the unlikely event a customer tries to take legal action against you, your website terms of use may help limit your liability. It will also help protect your rights to the content that appears on your website.

7. Website Privacy Policy
You need a privacy policy as soon as your website helps you collect any personal information. You need a privacy policy. A good one will outline which personal information you collect, how you store the information, and what you use it for.

8. Shareholders’ Agreement
The purpose of a shareholders’ agreement is to set forth understandings among shareholders. Shareholders’ agreements may take many forms, such as investor rights agreements, voting agreements, buy-sell agreements, etc. The specific format of the agreement is not as important as what the agreement covers.

9. Stock Purchase Agreement
This agreement defines all terms and conditions related to the purchase and sale of stock or shares in the company. It is sometimes used to document the sale of share to founders, and almost always used in sales of shares to investors. Similar documents for notes purchases may be used and are commonly known as notes purchase agreements.

10. Term Sheet
Term sheets outline the proposed terms of business transactions. They can be used to outline deal terms for a commercial transaction, to outline terms of an investment, or for any other reason a summary of terms might be useful prior to drafting definitive documents. Terms sheets can be binding or non-binding. They can be simple (commonly the case with convertible notes offerings, for example) or they can be complex and highly contentious. You’ll want to work closely with your lawyers to define the parameters of each term sheet.

When you’ve got most of your legal documents in place and are ready to embark on your pursuit of verified accredited investors, talk to the experts at VerifyInvestor.com. Submit your question via our contact page, and we’ll get back to you as quickly as we can.

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