Getting a business off the ground is an exciting time. You are at a point of seeing your idea turn into a true reality.
But wait. There are a few things that you need to put in place to make sure your business is built on a solid foundation. Just like doing construction, starting your business without some expert knowledge, can certainly cause you a lot of long-term problems. What you don’t know might hurt you. Before you do anything else, avoid the most common mistakes that many business owners make and establish a solid legal foundation to protect your company from the unforeseen situations and circumstances that can and may arise.
We’ve outline the four legal documents that a company’s founder should put into place as soon as their business idea evolves into reality so that your future growth is on a solid footing.
1. Business Entity Agreements
When starting a business, it’s crucial to select the proper business entity to structure in order to maximize tax savings and minimize personal liability. Some of the most popular entity structures include sole proprietorship, general and limited partnerships, C-corporations, S-corporations and limited liability companies (LLC or even an LLC taxed as an S-Corporation). We, along with your tax professional, can help you determine which of these would provide you with the most advantages. Different entity structures require different types of agreements. For example, C-corporations require corporate bylaws, while LLCs use an operating agreement. These agreements are legal documents that define each shareholder or member’s rights and responsibilities, along with establishing the provisions for running the company. Moreover, these agreements also outline how business communications will be handled, along with how disputes will be resolved.
You may also have a shareholder’s agreement or a partnership agreement, if there are multiple owners of the business, where you want to further define the relationship among the owners.
These agreements should be created and signed by all parties as soon as the company is launched. Working with us from the onset of your business, we can ensure your company record documents are created to ensure maximum protection for you and your business.
2. Intellectual Property Assignment Agreements
When launching a new business, you should make sure that all of the intellectual property (IP) brought into the company by its founders before startup, as well as any IP that’s subsequently created by owners and/or employees once the business is operational, is owned by the company, just the individuals. Transfer of IP ownership from individual to the company is done using intellectual property assignment agreements.
These agreements “assign” the company with complete ownership rights to all intellectual property assets-patents, trademarks, and copyrights-that are used to conduct business. Such agreements are typically required by most venture capital investors, and they also help protect the company from competitors and/or trolls looking to steal your ideas or products.
As your outside legal counsel, we can help you draft IP assignment agreements, so you can retain total control of all IP assets that your business relies on to operate and grow.
3. Employee Contracts and Offer Letters
If you plan to hire employees, it’s important to lay out the terms and conditions of employment so your team will understand exactly what’s expected from them and what they should expect from you. We can help you create comprehensive employment contracts and offer letters before you hire.
4. Sales and Service Contracts
Whether your company sells products, provides professional services, or a bit of both, you should have legal agreements in place to clearly lay out the rights and responsibilities of both the business and its customers. Sales contracts typically lay out the key elements- price, payment and credit terms, tax responsibilities, warranties, and liability limitations-for the sale of products and other goods. Service contracts, on the other hand, explain the fees, terms and conditions under which your company provides services, along with the spelling out the responsibilities and liabilities of each party. Ideally, service contracts should offer your company maximum flexibility for delivering the services, while also limiting its liability. Be sure the contract not only covers the traditional terms listed above, but also any unforeseen events or circumstances that may occur.
Contracts are put in place to protect you and limit your liability. Understanding your business needs and using legal leverage is key to making the best use of your documents. Buying documents “templates’ online won’t identify your specific business needs and you wont’ be able to use the law as leverage.
If you’re staring a new business or have already started one but still need to define the necessary legal agreements, contact us. We will serve as your outside legal counsel. We want you to be able to focus on your business knowing your interest is protected and your liability limited.