Many startups have gone on to become multi-billion dollar companies. This includes companies like Netflix, Uber, Instagram, and Square, among many others. However, if you are not careful with your startup, you could fail out of the gate. One thing you need to do is to set up the right contracts before you open for business. Below are just some of the examples.
Operating Agreement
While it is indeed possible to found a startup company without a legally binding contract on paper, doing so would be extremely foolhardy and introduce your company to a host of different problems. One contract you should have from the beginning is an operating agreement. Whether your company is an LLC, corporation, or some other legal entity, an operating agreement will explain who owns what percentage of the company, how decisions are made between owners, and how disputes will be resolved. It may even explain how founders can leave the company. Overall, it’s the basic framework your startup needs to operate.
Employment Agreements
Founding a startup typically requires hiring staff to get your project up off the ground and transform it into a fully functional business. As such, you’ll need to draft employment agreements with different hires to ensure that the best interests of your company and your employees are attended to. Contracts should also be carefully drafted for independent contractors. These contracts should outline how payment works and what will be expected of workers while on the job. It can help to have some templates set up before you start hiring.
Intellectual Property Agreements
One of the most important legal aspects of a startup, or any business for that matter, that needs to be protected via legally binding contracts is that company’s intellectual property. Intellectual property agreements will specify that any ideas, concepts, or other work product created within the scope of work for the company will belong to the company. The wording of such contracts should protect your property rights so employees or contractors cannot claim later that they own your intellectual property.
Confidentiality Agreements
Protecting your company also means protecting trade secrets. This is why confidentiality agreements are so important. They will help prevent the secrets you have developed that will give your company a strategic advantage from falling into the hands of your competitors. Without such an agreement, you can’t trust that these secrets won’t leave with your employees to another company.
While you can find many contract templates online, it’s always a good idea to consult with a business lawyer, like those at the Carter West business law firm. They can give you information specific to your situation and company needs. That way, your contracts will cover all of your bases.
Startups have a high risk of failure. One way to lessen that risk for your new company is by having the right contracts in place from launch. The examples above are only a starting point. Discuss what contracts you need to create with a seasoned business attorney.