Like most things, companies are most vulnerable at the beginning.
Forming a startup can be a very exciting time but you must proceed with caution. So many startups have not been able to get out of the planning stage because they did not file the correct documents. This is why it is always highly advisable to speak with a business lawyer as soon as possible as he will be able to guide you so that you do not make any careless mistakes that may cost you in the future.
This post will list some documents that most startups will definitely need. However, different industries need different documents so again it is highly recommended that you speak with a business lawyer.
It is hard to make it on your own, so when you do want to bring someone else in on your idea, you probably would want to make sure that they don’t spread your idea around. That is where the nondisclosure confidentiality agreement comes in. If completed properly, this document legally binds the person from communicating in any way about the idea/company.
To form the startup, you need to file the articles of incorporation. These are the documents that will make your startup a legal company. This is very important for any future moves your startup makes. There are also many documents that hinge on this being filed correctly.
If you co-founded the company with someone else, a clear founder agreement is a must. While you and your partner may feel invincible, you guys have no idea the road you’ll are about to travel. So before any rash decisions are made, having an agreement which solidifies the partnership will be immensely helpful.
After having all of the partnerships squared away it is time to focus on your intellectual property. This could be anything from your main invention to any logos or company names you have thought of. The ways to protect your intellectual property depends on what exactly it is. Here are three common categories:
1) Patents. Patents are generally for an invention or new product. It protects you, the inventor, from anyone else claiming the invention or product as their own.
Getting a patent is not easy and has certain stipulations. The invention must be “new and useful”. In essence, this means that your invention has to be something you came up with and has not been invented before and it also must serve a purpose.
The invention must also be “non-obvious”. This is where most patents tend to run into trouble. When they say “non-obvious”, they mean that it cannot be other inventions put together or an evolution of something that has already been patented. As this is occasionally subjective, it causes problems when trying to get a patent.
2) Copyrights. Any “original work of authorship” comes under the category of copyrights. The “original work of authorship” can be anything authored by someone, for example, a photography, song, book or piece of artwork. While a copyright is automatic, it is always better to have a registered copyright document so that if there is ever any legal trouble, you have proof of your copyright.
3) Trademarks. Apple, Microsoft and Just Do It are all trademarks. A name, logo, slogan or phrase, all fall under this category. A trademark will protect the “symbolic meaning” of the subject and will prevent anyone else from using it. If the trademark is used in public commerce, it is automatically protected, but again it is highly advisable to have it documented in case of any legal trouble.
Patents and trademarks can all be registered at the U.S Patent and Trademark Office (USPTO), while copyrights can be registered with the U.S. Copyright Office. All of this can be done by you yourself, but it is highly recommended to have a business lawyer present during the process so that no careless mistakes are made.
When your startup starts to come together, it is important to start thinking about the Bylaws. The bylaws are basically the rules and regulations of how the startup is run. This includes how votes are tallied, how the board is set up, roles and duties of officers and many more. It is the legal foundation for how the startup operates. Having thorough bylaws set up is an essential to avoid any problems within the startup in the future.
Another problem that can plague a startup is the assignment of intellectual property. This is essential when you are in the planning stage of a startup as ideas are being openly communicated about. This document will assign anything that is created by anyone affiliated to the startup as property of the startup. This will prevent anyone from using any sort of intellectual property for themselves.
As your startup progresses, many more documents will be needed to ensure the well-being of the company. Documents vary from industry to industry, but all companies need to have tax and share-holder agreements in place. As you add employees to the fray, many things like benefits, insurance and stock options will have to be properly documented.
This is just a small guide to the documents needed for a startup. The process of making your idea into a startup and then into a successful company is a long one and will be arduous. Hiring a lawyer who specializes in startup law is the key to not only survive, but to thrive and reach your goals.
Again when signing any documents it is highly recommended that you have a business lawyer look over everything.
This post is written by Sonny Desai, a pre-law UCLA student majoring in Economics with a minor in Entrepreneurship who has experience in writing about startup law.
For more information about what documents you may need as an entrepreneur, visit us at www.mollaeilaw.com or email Sam Mollaei, Esq., business lawyer, at [email protected] or via phone (818) 925-0002.
