What are the legal issues need to be considered by your startup?

Here are some of the common protective measures undertaken by startups:

• Patents. Patents are the best protection you can get for a new product.
• Copyrights.
• Trademarks.
• Service Marks.
• Trade Secrets.
• Confidentiality Agreements.
• Confidentiality and Invention Assignment Agreements for Employees.

Do startups have contracts?

Companies whether long established or just starting up—are not required to offer a written employment agreement to any employee they hire or currently employ. In some cases, however, it may make sense to have a written employment agreement signed by an employee.

What are legal implications?

Legal implications are the results or consequences of being involved in something according to the law. A good example is the case of marriage. A legal implication can either be positive or negative. If you are caught driving when drunk, the legal implication is negative.

Can investors in a company be sued?

Any private company can be sued by employees, shareholders, investors, customers, competitors, creditors, vendors and/or suppliers.

Can a company issue and sell stock to its founders?

Therefore, it is best practice that a company formally issue and sell stock to its founders at the time of incorporation. Founders should enter into a written restricted stock purchase agreement with the company that values the price of the shares at the time of purchase.

How many shares does a startup owner need to own?

As long as the startup maintains this simple capitalization structure, the number of unissued shares should not impact ownership of the company. For instance, if your startup has two founders, and you allocate each founder 4,000,000 of the 10,000,000 authorized shares, both founders would own 50 percent of the company.

Do you need to address the issue of founder ownership upon incorporation?

When the company incorporates several months later, you do not re-address the issue of ownership, as you feel you have already dealt with it via the prior agreement. This article offers a cautionary tale on the legal and business importance of addressing and documenting founder ownership interests upon incorporation.

Can a foundered company give options to its founders?

Founders can purchase stock at the then-current fair market value, but now pay more for that stock. The company could also grant options to the founders, though exercising those options could trigger negative tax consequences for founders.