Set up your startup legally and protect yourself. Company formation, contracts, IP protection, and compliance essentials.
Legal Setup Guide for Startups
Getting your legal foundation right early prevents expensive problems later. Here's what you need to know.
Company Formation
Entity Types:
- Delaware C-Corp: Best for venture-backed startups. Standard for fundraising.
- LLC: Simpler, pass-through taxation. Good for bootstrapped or lifestyle businesses.
- S-Corp: For small profitable businesses. Not ideal for venture funding.
Recommendation: If raising VC, form a Delaware C-Corp from day one.
Formation Checklist
Essential Steps:
- File Certificate of Incorporation in Delaware
- Get an EIN from the IRS
- Set up a business bank account
- Issue founder stock and sign 83(b) elections
- Create a stock option plan (10-15% of fully diluted shares)
- Draft bylaws and keep corporate minutes
- Register to do business in your home state if not Delaware
Formation Costs:
- DIY with Stripe Atlas: $500 (includes everything)
- Clerky: $799-2000 depending on complexity
- Lawyer: $2,000-5,000 for full formation
Intellectual Property Protection
Must-Have IP Documents:
- Invention Assignment Agreement: All employees/contractors assign IP to company
- Trademark: Register your company name and logo with USPTO ($275+ per class)
- Patents: Only if you have novel, defensible technology (expensive: $10-30K)
- Copyright: Automatic, but register key works for stronger protection
Essential Contracts
Templates You Need:
- Founder Agreement: Equity split, vesting, roles, IP assignment
- Employment Agreements: For full-time hires with equity grants
- Contractor Agreements: For freelancers and consultants
- Terms of Service: Legal terms for users of your product
- Privacy Policy: How you collect and use customer data
- NDA: For sensitive conversations with partners/investors
Compliance Requirements
Ongoing Compliance:
- Delaware Franchise Tax: Due March 1st annually ($175-450)
- Annual Report: File with Delaware Secretary of State
- Board Meetings: Document major decisions with minutes
- Stock Option Grants: Board approval required for all grants
- 409A Valuation: Required for option grants ($1,500-3,000 annually)
Data Privacy Laws:
- GDPR: If you have EU users, comply with data protection rules
- CCPA: If selling to California, give users data deletion rights
- Cookie Consent: Required for GDPR compliance
When to Hire a Lawyer:
Use Clerky or Stripe Atlas for formation. Hire a lawyer when: (1) fundraising, (2) getting acquired, (3) facing a legal dispute, or (4) dealing with complex regulatory issues.
