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The Most Important Legal Documents For Startups

eFiling Portal Team Thursday, December 22, 2015

Here is the list of legal documents that every startup should swear by.

Not creating a solid, legally documented ground for the business to grow on is the most common and troublesome mistake that startup entrepreneurs commit. The instinct to quickly turn your dreams into reality is undoubtedly very strong and the excitement is uncontrollable, but one cannot stress more on the point that it is very important to have all issues and legal commitments sorted to run a hassle free business.

This article has been prepared for helping startup entrepreneurs with the most important legal documents that they essentially need to avoid spending extra time, money and energy on avoidable matters.

1. Articles of Incorporation.

One of the blunders that almost every startup entrepreneur is a part of is neglecting the importance of documenting the proper business structure.

Different people might have different opinions on the issue, however this cannot be neglected that it is extremely important for every type of company to maintain solid grounds to build their business on.

2. Intellectual Property (IP) Assignment Agreement.

The Intellectual Property is one such document in whose hands lies the power to attract the investments for further growth and development. This states how important this document is. IP assignment agreement is most important for tech companies because investors and venture capital firms often evaluate the firms on the basis of their portfolios. This however does not mean that only tech companies should hold the document.

The Startup founders a should make sure that they possess complete ownership of all IP assets in writing. This is essential and is stressed upon in order to be secured against the claims filed by the companies trying to copy the business model.

3. Bylaws.

Bylaws are created to ensure uncomplicated and less problematic operations. Under the Bylaws all the internal rules of the company regarding the settle disputes, or selection of leadership and powers of shareholders etc are decided.

Along with above mentioned, an important aspect to be essentially made a part of Bylaws is that the Bylaws, for decisions over certain actions should have provision for the option of voting.

4. Founder’s Agreement

The Founder's Agreement, as the name suggests is signed between all the co-founders of the company in order to avoid any conflict among the founding parties. In the Founder's agreement the things like the agreed relationship between the founders, outline of the basic communication and conflict-resolution clause etc are included.

5. Non-Disclosure Agreements

The possession of NDA is imperative prior to any kind of business related communication between the entrepreneur and the client. A Non-Disclosure Agreement is required to protect the startup by safeguarding the ideas and intellectual property. In a Non-Disclosure Agreement the details about the information, like the ways to handle confidential information, names of those who own that information, the time of disclosure and the time period for the confidentiality to be maintained, are to be enlisted for the potential employee/client to be signed.

6. Shareholder Agreements.

A shareholder agreement that secures the rights of shareholders along with all the details associated with it, like the times they are to excess certain rights, should be created when a startup is ready to raise funds through private investments. Generally the shareholders agreement consists of rights like the shareholders’ right to transfer shares, or of first refusal, or the right of redemption in case of the death or disability and also the power to manage and run the startup. Since shareholders hold such important rights, it is extremely important on the part of the founders to document their sale of shares. This is also essential to avoid financial penalties under various laws.

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