5 Legal Documents Every Tech Startup Needs

5 Legal Documents Every Tech Startup Needs

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Introduction

There are various documents which would be required by every startup. Many of these documents are needed to not only protect the business but also the interest of founders too. Some of these documents include;

1. IP Assignment Agreement

IP is critical to any startup’s value, this is even truer for tech companies. In many cases, tech startup founders will have personally owned their IP in the early stages of their business. In such cases, it is important to subsequently assign the IP to the same entity that investors are investing in. To do this, an IP agreement to transfer ownership of the IP to the company is necessary.

In addition, depending on your startup’s circumstances, additional IP agreements may be required. This may include an IP assignment agreement if you use external developers, or the incorporation of a holding company to hold the assets of the operating entity.

Make sure your ideas and inventions stay in the business — instead of walking out the door with your employees. A proprietary rights/IP assignment agreement will help you do just that, ensuring that all of the concepts and inventions your employees create at work remain the property of your company.

An IP assignment agreement could be the key legal document that determines whether your startup can attract the investments it needs in order to grow. This is especially true for technology companies, because it’s often the value of your IP portfolio that investors and venture capital firms would evaluate.

2. Non-Disclosure Agreement

An NDA is a  document that offers a lot of protection and benefits. It ensures that you keep your trade secrets safe from competitors and other third parties, be it potential business partners, customers or external developers. In simple terms, an NDA ensures that your confidential information remains confidential.

3. Employment Agreements

Once your startup begins to grow to the point that you need to start hiring employees, you will need to have a well-drafted employment agreement ready to implement. This will set out the role and responsibilities of your new employee(s), remuneration and benefits, IP rights, leave entitlements, and termination of the employment, among other things. They should clearly state the following. 

• Terms of employment (e.g., compensation, role responsibilities, working hours and grounds for termination)

• Reporting structure

• IP ownership of work

• Expectations

• Required commitments

• Share vesting

• Company policies (e.g., vacation days, paid time off structure)

4. Shareholders’ agreement

A shareholders’ agreement will set everything in stone and define how your company handles money in, money out, shareholders’ exits, management controls, etc. Shareholder agreement determines the rights of shareholders and defines when they can exercise those rights. Those rights can include shareholders’ right to transfer shares, right of first refusal, redemption upon death or disability and shareholders’ power to manage and run the startup. It’s also important that founders document the sale of any shares

5. Founders Agreement

Being good friends doesn’t mean you’ll be good business partners. You need to plan for what will happen if one of you wants to leave or sell.To avoid any conflict among founding parties, all co-founders should sign a comprehensive agreement. The agreement should define the relationship of the founders, provide the expectation that all work will belong to some entity in the future and outline a basic communication and conflict-resolution clause that can help prevent disputes.

Conclusion

There are several other agreements which a tech startup would require like the memorandum and articles of association, technology assignment agreements, etc. It is advised that before creating or executing any agreements, you get the services of a Lawyer.