Establishing a strong legal structure is critical to the successful development of a startup. Sometimes, startup founders can get caught in the adrenalin of turning their idea into a reality neglecting the administrative work and legal documents their startup needs. These are some important legal documents that founders will likely need in the beginning years of developing their startup in order to secure legal protection.
Registering As A Company
A company is not the only business structure available to your startup but is the most common. It is typically a more favourable structure compared to sole trader or partnership because setting up as a company affords your startup its own legal identity, providing privileges such as corporate tax rates and limited liability. Registering a company is different to registering a business name. You can register a company using the Australian Government’s Business Registration Service .
Indeed, establishing your startup as a company may not be needed in the very beginning stages of developing your startup or perhaps not at all. Although, through assessing your business plan, you need to decide if a company suits your needs or if you should use a different business structure.
Shareholders Agreement / Partnership Agreement
A shareholder agreement is a fundamental document to the structure and development of your startup. A shareholders agreement is a contract between those who own shares, and the company who has issued them. The contract regulates the rights and duties of shareholders with regards to their ownership of those shares.
This document may not be relevant in the very initial stages of your startup unless you’re in a partnership and want to be secured. If you are setting up a startup with another person, having a partnership agreement will protect both parties if there is a dispute.
Without a shareholder agreement in place, the company opens itself to risk in the event of a dispute with shareholders. Thus, the document protects your startup when issues arise between shareholders.
See our article here for more information on how shareholder agreements work.
IP Assignment Agreement
IP assignment agreements are critical to protect the assets of your startup as it essentially secures future profits legally belonging to your startup.
An IP assignment agreement is an explicit signed agreement assigning IP to your company. That is IP created by an employee or consultant during the course of their services to your startup. Without having a legal title to the IP, the startup is near worthless.
Ensures that the ownership of a work product created for your company by an employee or consultant is rightfully transferred. It should also include assigning the founders IP to the company’s title. For this reason a well-drafted agreement is vital to protecting your startups ownership title.
Employment Agreements
This document becomes relevant when your startup begins to hire employees. The agreement’s purpose is to set out the rights and obligations of employees of the startup in relation to the startup. Establishing the legal relationship between the employer and employee as it identifies the role of the employee, the requirements and expectations of the role, their remuneration and benefit and any leave entitlements.
Having a well drafted employment contract that clearly outlines the terms and conditions of employment will provide certainty for your employees and assist with protecting the confidential information of your startup.
Business Terms And Conditions
Having a well drafted set of business terms and conditions that can be easily viewable and accepted by your clients and customers becomes an essential document if you are selling products, services or facilitating an online marketplace. This may include a website terms of use document that defines your relationships with the users of your website.
The type of business terms and conditions that your startup requires for protection is dependent upon the nature of the product or service.
Non-disclosure Agreements
Imperative to have an NDA readily available before engaging in any business conversation with an outside party, such as investors or web developers, because it safeguards the startups IP. An NDA provides legal protection to your startup by preventing the unauthorized disclosure of information about your business. An NDA deed will allow your startup to confidently share confidential information with another person, investor or company because the legal document binds both parties to a duty of confidentiality.
Phil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.
Raymond is a legal intern at OpenLegal, working with our legal content team. He is currently a penultimate student at the University of Technology Sydney, studying a Juris Doctor degree with an undergraduate Bachelor of Global Studies. He is particularly interested in Intellectual Property law and the increasing internationalisation of that area of business.
