Legal Documents All Startups Need to Know About

Starting a business as a legal entity requires a business structure and registration. This means you have to do more than market it, create a business plan and secure funding. Multiple legalities need to be taken care of before the doors can open for business, wherever it resides. Some countries and indeed states make it really easy to set up a business entity, for example, registering the company name can take just a few minutes when you complete the application online. However, there is a lot more to a business than its name.

Operating Agreement

In situations where multiple founders are in-place, operating agreements are necessary. This defines each party’s relationship to the business and their specific duties. Essentially, it creates boundaries for each person involved. Resolution clauses, methods of contact, and changing of ownership following a severing of a partnership or death must all be included. The operating agreement also notes the number of shares issued to each founder. This is also where details surrounding the vesting schedule will be determined.

Trademark Documentation

Brand logos, phrases and intellectual ideas specifically for the brand should all be trademarked. This is an identity-theft tactic for businesses. Without trademarking and copyrighting in place, another business could easily steal a logo, brand name, slogan or product and be within their rights to do so in the way of industry competition. For this step, you will need to work with a trademark attorney to protect your brand’s intellectual property.

Non-Disclosure Agreement (NDA)

These agreements should be in place to protect intellectual property shared via employees, founders or executive staff. These agreements should be in place when speaking to investors or bringing in new employees for confidential projects. The NDA prevents investors, potential new employees and existing employees from discussing sensitive company-specific information with any outside person.

If you are unsure of how to create a proper NDA for your business, an attorney can compose a customized agreement specific to your business.

Employee Contracts/Applications

Employees should all have an application on file and a signed employee handbook or contract. These contracts should be detailed and should include legal disclosures freeing the company from some legal liability in the event of employee negligence which would be issues of intentional contamination, theft and intentional injury where the employee would face criminal discipline.

Subsidiary Entities

Subsidiary entities are set up in a very similar way to your parent company. Corporate ownership offers more opportunities for a subsidiary entity/company formation. A director must be assigned and has to be the same person as the parent company. A company secretary is no longer required, just a single director.

Also needed for subsidiary companies:

• Registered office address for the home country of the business
• Companies may not be owned by another company
• Directors home and service addresses (service addresses are public record)

The advantage of subsidiary companies is that they can become a standalone company with a few changes to the registered information and legally filed documentation. This type of situation is ideal for overseas businesses, multiple business types under one brand and multiple office locations.

Bylaws

Bylaws are simply internal rules set for the company, shareholders and founders. You will also create the rights and powers for all shareholders and implement voting thresholds for when situations requiring an approval voting process to take place. These bylaws are important, especially in times of brand/company financial difficulty and changing board members/executive staff.

Incorporation Documentation

Even if your business is technically operating as a sole proprietorship, it is ideal for incorporating the business. If legal trouble arises, personal assets can be frozen, seized or have liens placed on them. Incorporating the business protects your personal assets.

The best way to make your small business incorporated is to file it as a limited liability company (LLC). If the business fails, you still have your personal property, funding and monetary assets available. Incorporation documentation should be filed as soon as a business name, logo and footprints are set.

Closing Thoughts

If you are starting a sole proprietorship, you should still work with an attorney to help you get paperwork filed. If your business is not legal in the eyes of the law, you could lose your business and/or face steep penalties for not having the proper legal documents in place. All of your documentation should be in place at least 30 days before you open for business in case any documents were forgotten initially.