Starting a new business is an exhilarating yet intimidating endeavour.
A crucial initial step is complying with legal requirements. Crafting legal documents, although potentially arduous, is essential for safeguarding your business and preempting future legal complications. This startup legal document checklist serves as a guide to ensure you possess all required legal paperwork.
Before delving into the necessary legal documents for commencing a business, we must provide this disclaimer.
DISCLAIMER: Please note that the following recommendations are not provided by a legal expert, and are solely intended to offer general guidance. Prior to implementing any of this advice, it is strongly recommended that you seek professional legal advice. It is important to keep in mind that any consequences resulting from following this advice are not the responsibility of the author.
If you prefer to watch a video from an Attorney, have a look at this video which will guide you through the 16 step legal checklist for new businesses.
Why do I Need Legal Documents?
Starting a small business takes a lot of time, money, and effort. While many entrepreneurs focus on developing their products and marketing, they often forget about the importance of legal paperwork. These documents are crucial for safeguarding your small business from potential legal problems, disputes, and liabilities.
Legal documents serve several key purposes:
- Establishing Your Business’s Legal Structure: For instance, you need “articles of incorporation” to officially create and register your business. Without these documents, your business’s legal structure might become unclear, leading to potential legal conflicts.
- Protecting Business Assets: Legal documents also protect your business assets, including intellectual property like trademarks, patents, and copyrights. Filing these documents prevents others from using your assets and helps avoid legal issues related to intellectual property.
- Defining Business Agreements: It’s important to outline business agreements using legal documents. For example, a contract that spells out the rights and responsibilities of both parties in a partnership can prevent disputes. These legally binding agreements protect your business and ensure everyone knows what they’re supposed to do.
- Compliance with Regulations: In all countries, specific legal documents are required to comply with state and federal regulations. This includes obtaining business licenses, permits, and filing tax documents as mandated by law. Failure to do so can result in fines and penalties.
In essence, legal documents are a critical part of running a small business, helping you operate smoothly, protect your assets, and stay on the right side of the law.
What Legal Documents Do I Need For My Startup?
In order to start working with clients, your business will need:
- Articles of Incorporation
- Intellectual Property Assignment
- Employment Agreement
Continue reading below to understand why these legal documents are necessary.
What Legal Documents Do I Need For My Small Startup?
The list above may seem quite overwhelming for a small startup. Don’t worry, if you’re just starting out as a solopreneur you mainly need to focus on the site and product terms. While it’s useful to have a general understanding of the documents required for bigger and more complex businesses to operate, the site and product terms are the only legal documents required by law.
Articles of Incorporation
If you’re looking to start your small business as a corporation or limited liability company, you need to prepare the correct legal documents to submit to your country of origin. These documents generally include details such as the name, address, what the company does, the structure of the business and how the shares will be divided between stakeholders.
The process of creating these legal documents varies depending on the country in which you’re creating a company.
Why should I start a company?
While you don’t need to create a company to start your online business (especially if you’re just starting out), there are a number of benefits to the additional paperwork:
- More Tax Efficient: Often, less tax needs to be paid on profits made when a business is run as a limited company, as tax does not need to be paid out on dividend
- Distinct Legal Entity: A limited company is a distinct legal entity from its owners, meaning that if your company is sued, your personal bank balance will not be impacted
- Professional Image: Working via an incorporated company provides a more professional image
- Shares: A limited company can issue various shares to different stakeholders
By-laws are the documents that set out how the company should operate including:
- How the company will run on a day-to-day basis
- The names of the board of directors
- Requirements for meetings
If your business will be employing staff on a part-time, full-time or freelance basis, adequate documentation needs to be set out identifying:
- Employment agreements including compensation, equity, what happens if someone leaves/is fired
- Disclosure Agreements so that company information is not shared publically
Site and Product Terms
- What personal information you collect
- How you collect it
- How you intend to use the information
- Whether you will disclose this information to any third parties (such as Google Analytics)
Cookies Policy Template
Terms of Service
The terms of service are the legal agreements between a service provider and a user of the service. The terms of service normally explain the appropriate and the allowed use of the website, along with the rights of the users using the product.
This is an incredibly important document as it limits your business’ liability and minimises the potential misuse of your product.
Terms of Service Template
Creating a simple term of service can be done easily using this terms of service generator.
Refund Policy Policy
A refund policy is a document that outlines the terms and conditions under which a company will issue refunds to its customers. It is a critical document for any business that sells products or services to customers as it establishes clear guidelines on the process for returns and refunds. A transparent refund policy can help build customer trust and provide a mechanism for resolving disputes between the company and its customers. By having a well-defined refund policy in place, companies can reduce the risk of legal disputes, improve customer satisfaction, and establish a reputation for transparency and fairness.
Can I Use Templates For The Legal Documents of My Startup?
The effectiveness of a template depends on its quality. While using templates can be efficient, it is generally not advisable to simply copy and paste a random document found online. This is because such documents are not tailored to your specific needs and circumstances. You cannot be certain of the document’s origin, the specific business transactions it was designed for, or the applicable legal jurisdiction.
What Legal Extras Should I Consider When Starting A Business?
When considering starting a business, there are several critical legal matters that require attention. These include:
- Acquiring the necessary licenses and permits: Ensuring compliance with legal requirements by obtaining the appropriate licenses and permits for your business operations.
- Establishing a corporate entity: Choosing and setting up a legal structure for your business, such as a sole proprietorship, partnership, limited liability company (LLC), or corporation.
- Selecting a business structure: Deciding on the organizational structure that best suits your business goals and offers the desired level of liability protection, such as a C-corporation, S-corporation, or LLC.
- Securing financing: Exploring and securing financial resources for your business, which may involve obtaining loans, seeking investors, or pursuing other funding options.
- Protecting intellectual property rights: Identifying and safeguarding your intellectual property assets, including trademarks, copyrights, patents, and trade secrets, through appropriate legal measures.
- Non-disclosure agreements: Implementing confidentiality agreements to protect sensitive information when engaging with employees, contractors, partners, or other parties who may have access to proprietary knowledge.
- Share transfers and acquisitions: Addressing legal aspects related to buying or selling shares, acquiring other businesses, or undergoing ownership changes, including drafting contracts and ensuring compliance with applicable regulations.
It is essential to consult with legal professionals experienced in business law to ensure compliance and protect your interests throughout these processes.
- Starting a small business is exciting but comes with legal responsibilities that should not be overlooked.
- Legal documents are crucial for protecting your business from potential legal issues, defining its structure, safeguarding assets, and ensuring compliance with regulations.
- Using templates for legal documents can be helpful, but they should be customized to your specific needs and circumstances.
- Other legal considerations when starting a business include acquiring licenses and permits, selecting a suitable legal structure, securing financing, protecting intellectual property, implementing non-disclosure agreements, and addressing share transfers and acquisitions.
- Seek legal advice from professionals experienced in business law to ensure compliance and protect your interests during these processes.
Now that you’ve created the necessary legal documents for your start-up, why not check out the 40 things that you need to do before launching your startup.