As CEO of a startup that helps provide legal services for other startups, I think I can shed some light on this one. Here is a non-exhaustive list of important practices for a startup to follow:
- Hire a good startup lawyer in the very beginning. Look for someone that provides the insight needed to understand the everyday stressors that you face (in other words – hire an attorney who has worked with startups before!). Typically it is a lawyer who understands that risk can’t be eliminated, but rather it must be managed strategically from a cost-benefit point of view. The lawyer should understand the company’s culture and objectives and be committed to gaining the trust of the startup’s key personnel. Most importantly, the lawyer must be committed to being available when needed.
- Incorporate your startup. This can be combined with my first tip if you end up hiring an attorney, who will surely take care of this for you. If you can figure out how to incorporate on your own great, but I wouldn’t recommend it. It’s easy to make mistakes and if those mistakes are made, you’ll end up paying an attorney much more in the long run. A common mistake is incorporating as the wrong business entity. An attorney is the most apt to advise you on the right business entity for your startup. I urge you to incorporate as early as possible in order to gain the personal protection that comes with it; it would be very difficult to sustain your startup if your personal assets are at risk from a lawsuit.
- Protect your intellectual property (IP). When you are establishing your startup, it’s vital that you obtain any relevant trademarks, patents, or copyrights before your IP is out for public consumption. The obvious risk you run by not doing so is that, if unprotected, your creations are fair game for competitors to steal. Other IP agreements are super important to have depending on your industry. These agreements include protections against trade secrets, confidentiality agreements, and non-compete agreements. Lastly, it’s imperative for your startup to have these agreements ready to go when hiring new employees, talking to investors, consultants, and possibly even distributors.
- Draft all other relevant documents. It’s hard to say which docs you’ll need as that will depend on the business entity and what state you’re in. This, again, is something an attorney will help you with.
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