Startup Basics: Crucial Legal Matters to Prioritize

Legal Matters

Forming a startup is much like getting married to your co-founders. There’s likewise a ton of crucial legal issues to pin down, a prenuptial agreement if you will, but more complicated. However, because of limited resources, it could be difficult to determine which legal stuff to prioritize. Start with the following vital legal issues.

Make Control Agreements Formal

Before deciding on other things, you need to make sure that control agreements are in place between you and the other founders. Otherwise, waiting until a disagreement arises to formalize control could lead to deeper and more disagreements. At the very least, make sure to pin down essential control agreements including a voting agreement, the right of first refusal, and the vesting schedule for equity. Make sure that you make these control arrangements legal and detailed in definitive contracts.

Safeguard Your Trade Secrets

While you shouldn’t keep all your ideas to yourself, you must also be extremely careful to whom you share them with and how much information you share, advisesa business attorney in Denver who works with small business and startup entrepreneurs. In some cases, however, this tactic might not be practical with a potential client or partner who would most likely need to understand specific details of your idea or technology thoroughly.

In this case, you might have to request that your client sign an NDA or nondisclosure agreement, which is a legal contract that states that your client can’t disclose all confidential information regarding your business, its practices, or its ideas to anyone. If a client refuses to sign an NDA, at the very least, make sure your prepared materials have “Confidential and Proprietary” written all over them, including the recipient’s name and date you sent the materials.

Make Sure You Own Your IP

Safeguarding and owning your intellectual property is vital to your startup’s success. IP includes any designs, inventions, trade secrets, and the like. The manner in which you protect your IP would depend directly on the specific kinds of IP you have. The main thing you need to remember about protecting your IP is that you have to clearly and legally own it, or at least have the appropriate license for its use, most especially if your startup’s main intellectual property is technology.

Starting a startup is an exciting time, but it also comes with stress and challenges along the way. Yes, you’ll face various obstacles, but if you fix your legal issues and other difficult decisions right from the start, instead of just fixing issues as they arise, you’ll be setting your business up for success.