5 legal documents for every digital startup company

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Although your digital startup is set up in an infinite internet space, that doesn’t mean it doesn’t need to have a firm legal structure. Every owner of the digital startup company is trying to grow quickly, but somehow most of them tend to forget about legal aspects during the process of making their idea a reality. Aesthetical things such as logo, fonts, and colors are important, but they’re not the true nuts and bolts of your operation. If there are gaping holes on the ground floor of your operation your business will experience a complete collapse before you know it.

And the most dangerous gap is created by the absence of the key legal documents. You need to make sure your business is in compliance with the laws of your country so, before you focus on creating your marketing loop, you need to pause and cover your legal bases. That way you’ll not only avoid costly legal battles down the road but actually, make sure your business has value – if it doesn’t exist legally its value is not greater than the value of the land your offices are built on.

While it’ advisable to have a lawyer who will help you navigate any legal situation, it’s mandatory that you have a knowledge of various legal documents you’ll need for the launch and dealing with co-founders, shareholders, vendors, and employees. So follow us through the paperwork.

1. The Structure

The first thing you need to set up when it comes to your digital startup is its structure, and for that, you’re gonna need the certificate of incorporation. This document is like a high school diploma for your business – it makes all of your hard work become official. In other words, your company becomes a legal entity. You’ll need this piece of paper every time you want to sell the shares to new investors or apply for any sort of loan. You can’t open a business bank account without it, nor sell the company if it comes to that. If you don’t incorporate your startup this could result in personal liabilities and tax penalties for yourself and the co-founders. Be very careful when taking your pick – if you set up only a sole proprietorship the founders will be personally responsible for legal liabilities and huge income tax bills that may appear. If your startup has multiple shareholders, forming a C corporation is probably the best way to go. And if you want to avoid heavier fees during the early stage of growth and achieve fewer tax obligations you should think about a limited liability company (LLC). If you don’t incorporate your startup properly you risk losing your reputation, personal savings, and even your home.

2. The Idea

The world is full of business ideas, but only some of them are worth the investments that will allow them to grow. The key legal document that will make the evaluation of venture capital firms and investors positive is the intellectual property (IP) assignment agreement, especially for digital technology companies. This document provides you with a complete ownership of all your IP assets and therefore creates an entry barrier for other companies and patent trolls who are trying to copy your business model. That way you’ll avoid any costly claims and prevent possible rogue team members from absconding with your intellectual property.

3. The Secrecy

Every business contains a particular amount of sensitive information – financial information, future plans, company secrets, customer data – and keeping it away from other parties demands a bit of secrecy. Of course, this information must be available to at least some of the employees and also external auditors, consultants, contractors, and vendors need to have access in order to their jobs. That’s why it’s important to have a signed non-disclosure agreement (NDA) before any business conversation takes place. This document protects your startup by safeguarding your intellectual property and ideas. It clearly defines confidential information, outlines the proper ways for its handling, identifies the owner of the information, and determines the time period of disclosure.

4. The Trust

Although we’ve seen that every business interaction requires some secrecy, the strong work relationship with your employees demands an equal amount of trust. And that trust, like everything else in business, needs to have a written form. Every startup owner knows he should draft up clear employment contracts, but many forget to include offer letters. Only with the combination of these two documents, your employees will be able to completely understand what’s expected of them, but they’ll also see clearly what do they get in return. It’s important to clearly define your expectations and their commitments, duties, and responsibilities, but in order to build trust, you also need to pay attention to their rights and health benefits. That’s why it’s advisable to have trusted an experienced workers compensation solicitors present throughout the process of drafting to make sure all of the employees will be safe and secure, which is a foundation for trust.

5. The Conflict

Having all the above-mentioned documents in place doesn’t mean there won’t be any conflicts inside the company, especially if there are many co-founders. If you want to prevent the disputes it’s important to outline a conflict resolution clause in the comprehensive founder’s agreement that needs to be signed by every co-founder. The purpose of this document is to clearly define the relationship between the founders and the roles of the each one, set up a basic communication method, and to make it crystal clear that the founders and their work are the property of the company entity.

The first step is to find your place on the legal map. Then make sure your ideas will remain your own and insist on confidentiality which you’ll reward with trust. In order to make these things run smoothly, there has to be peace in the Olympos above.

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