You’ve got your product and you know your market. All you need to do now is get your business started. But in the complicated world of federal and state incorporation, how does a business that’s just getting started make sure to avoid problems and legal issues later on?
Here’s a quick primer on the legal documents for startups that can get your business off and running.
Articles of Incorporation or Corporate Charter
Once you’ve decided which type of business you’ll be registering, this is your next step. Articles of Incorporation or a Corporate Charter is a document written by a corporation’s founders and filed with a U.S. state that details all relevant information about the business. This includes the company’s name, address, objectives, planned business intentions and structure. The Articles of Incorporation or Corporate Charter are filed with the state government. Once approved, the corporation is born, and legally entitled to commence business activities. Articles of Incorporation may also be called “Articles of Association” or “Certificate of Incorporation”.
Operating Agreement (or Founders Agreement)
When multiple people or parties are coming together to start a company, an Operating Agreement or Founders Agreement is essential. This document outlines four key areas: ownership, decision-making, responsibilities and operating procedures. A strong Founders Agreement delineates who owns what percentage of a company, the roles and responsibilities of all founders, the process if/when a founder moves on, and how key decisions are made.
Of all the legal documents for startups listed here, this one's unavoidable: A crystal clear agreement makes the operating process of a new business smooth and helps avoid conflict and problems later on.
Intellectual Property (IP) Assignment Agreement
This is one of the most important documents for start-ups who are selling their unique ideas and technologies with the world. An Intellectual Property Agreement defines how a company’s intellectual property is used and transferred, particularly when different people and groups are working together. An Intellectual Property Agreement delineates the rights and responsibilities and protections for each party. There are two types of Intellectual Property Assignment Agreements to consider: Technology Assignment Agreements and Invention Assignment Agreements.
A Corporation’s bylaws detail operating procedures on a day-to-day basis. What is required in a corporation’s bylaws may different from state to state, but generally speaking, the bylaws should be consistent with the Articles of Incorporation. Bylaws often include the rights and powers of directors, officers and shareholders, including nomination and election processes. Bylaws also govern how to settle disputes within a corporation.
A non-disclosure agreement provides protection for the business that is just getting started. Sometimes called proprietary information agreements (PIA), confidential disclosure agreements (CDA) or confidentiality agreements (CA), a non-disclosure agreement is a legal document that governs the use and restrictions of confidential information relating to a company. It is particularly important when a business is considering working with another company, individual or partnership, including hiring independent contractors and employees.
A company’s shareholder agreement is a document that describes the rights and obligations of a company’s shareholders. This includes regulations surrounding the relationship with shareholders and company management. It also details the agreement regarding ownership shares, and shareholder protection and privileges.
With these six legal documents for startups in mind, you'll be able to pinpoint which ones you have in hand and which ones you'll need to draft soon. Good luck!