With more than 2,000 startups founded in the United States in 2023, it's important for founders to learn about the legal documentation they need in order to function. Proper legal documentation establishes the business's legal structure and associated tax obligations, liability and decision-making processes – whether it's a corporation or a limited liability company (LLC). Without the right structure, founders could face personal liability for business debts or disputes.

Legal documents clarify ownership rights, investor relations and intellectual property protection. They define the terms of ownership, investor equity, roles and responsibilities – preventing conflicts among founders or with investors. Protecting intellectual property through the right legal means safeguards innovations and the company's value.

Legal documents enable startups to establish and maintain legal and regulatory compliance. Startups must follow industry-specific regulations, employment laws and data protection standards. Proper documentation ensures compliance and helps avoid fines, legal challenges or operational interruptions.

Additionally, legal documents build trust with stakeholders, such as investors, customers and partners. They demonstrate the company's commitment to legality and professionalism, which can enhance its reputation and attract more business and investment opportunities.

Here is a rundown of the primary legal documents that startup founders may need when setting up and running business operations in the US.

What's in this article?

• Company formation and governing documents
  
• Intellectual property assignment agreements
  
• Confidentiality and non-disclosure agreements
  
• Employee agreements and offer letters
  
• Shareholder and founder agreements
  

Company formation and governing documents

Company formation and governing documents form the backbone of a company's legal and organisational structure. They define the business type, ownership structure, bylaws, internal rules and actions taken by the board of directors.

• Articles of incorporation or articles of organisation: The articles of incorporation (or articles of organisation) officially form the business entity, whether it's a corporation or an LLC. They outline basic details, such as the name, purpose and structure.

• Bylaws (for corporations) or operating agreements (for LLCs): These documents detail the organisation's internal rules, such as the roles of directors and officers, meeting protocols, and how decisions are made.

• Board of directors' meeting minutes: Meeting minutes are records of meetings held by the board of directors that document the board's decisions and actions.

• Shareholder agreements: Shareholder agreements outline shareholders' rights and responsibilities. They include provisions for the transfer of shares, how decisions are made and how disputes are resolved.

• Stock certificates: For corporations issuing stock, stock certificates represent the ownership of shares in the company.

• Employer identification number (EIN) registration: This is a federal tax ID obtained from the IRS. An EIN is required for reporting taxes, recruiting employees and opening business bank accounts.

• Business licences and permits: Depending on the type of business and location, various licences and permits might be required to operate legally.

• Founders' agreements: For startups, the founders' agreement details the roles, responsibilities, equity ownership and other terms agreed upon by the founders.

Intellectual property assignment agreements

Intellectual property assignment agreements clarify and protect the company's legal ownership of intellectual property, such as patents, trademarks, copyrights and trade secrets.

• Patent assignments: Patent assignments transfer the rights of patent-protected inventions from the inventors to the company.

• Trademark assignments: Trademark assignments transfer any rights associated with trademarks (e.g. logos or brand names) from individuals to the business.

• Copyright assignments: Copyright assignments transfer the rights of written, musical, artistic or other creative works from the original creators to the company.

• Trade secret agreements: Trade secret agreements prohibit employees or contractors from disclosing or misusing trade secrets, which are defined as valuable, confidential business information.

• Work-for-hire agreements: Work-for-hire agreements specify that any work created by employees or contractors in the course of their job is owned by the company.

• Invention assignment agreements: Invention assignment agreements are agreements signed by employees or contractors establishing that any inventions they create during their employment or contract period belong to the company.

• Software assignment agreements: Software assignment agreements transfer the ownership rights of software from the developers to the company.

Confidentiality and non-disclosure agreements

Confidentiality and non-disclosure agreements (NDAs) protect a company's sensitive information by legally binding informed parties to confidentiality.

• Employee confidentiality agreements: These agreements legally prohibit employees from disclosing or misusing confidential information during or after their employment.

• Consultant/contractor non-disclosure agreements: These agreements legally prohibit consultants or contractors from disclosing or misusing any confidential information that they might access during their work with the company.

• Mutual non-disclosure agreements: These agreements prohibit both parties from disclosing the other's confidential information. They are often used during negotiations or partnerships with other businesses.

• Non-disclosure agreements for prospective investors: These agreements prohibit potential investors from sharing confidential information, such as business plans or other sensitive data.

• Exit interview confidentiality agreements: These agreements remind exiting employees of their obligation not to disclose the company's confidential information.

• Non-compete agreements: These agreements are used to prevent former employees or associates from entering into direct competition with the company. They often include clauses related to the non-disclosure of sensitive information.

• Invention or software assignment agreements: Assignment agreements, which grant the company ownership of any inventions or software created by employees or contractors, often include confidentiality clauses to protect the related information.

Employee agreements and offer letters

These documents define the relationship between employer and the employee. They dictate roles, responsibilities and expectations for the terms of employment.

• Employment offer letters: An employment offer letter is the initial document provided to a candidate. It outlines the terms of the employment offer, including the position, salary, start date and other employment conditions.

• Employment agreements: An employment agreement is a more detailed contract that outlines the terms of employment after an offer has been accepted. It includes job responsibilities, compensation, benefits, termination conditions and confidentiality obligations.

• Non-compete agreements: These restrict employees from entering into competition with the company or working for a competitor for a certain period after leaving the company.

• Non-solicitation agreements: These prevent former employees from soliciting the company's clients or employees after they leave.

• Arbitration agreements: These stipulate that employment disputes will be resolved through arbitration rather than through court litigation. They're often included as a clause in employment agreements.

• Employee handbook acknowledgements of receipt: These acknowledge that employees have received, read and agree to abide by the company's employee handbook.

• Performance improvement plans (PIPs): A PIP outlines specific areas where an employee's performance needs improvement and the goals they need to meet within a set time frame.

• Severance agreements: A severance agreement details severance pay, benefits and any other compensation that an employee is entitled to receive upon termination – often in exchange for a release of claims against the employer.

• Internship agreements: An internship agreement defines the terms of an internship, including the role, responsibilities, duration and any compensation or credit provided.

Shareholder and founder agreements

Shareholder and founder agreements define the relationship between shareholders and the company. They also detail the roles, rights and responsibilities for all involved parties – particularly when it comes to the sale or transfer of shares.

• Founders' agreements: A founders' agreement outlines the roles, responsibilities, equity ownership and other terms agreed upon by the founders of the company. It can also cover what happens if a founder leaves the company.

• Shareholders' agreements: A shareholders' agreement details the rights and obligations of shareholders, including how shares can be bought, sold or transferred – and how decisions affecting shareholders will be made.

• Stock purchase agreements: A stock purchase agreement documents the details of a sale or transfer of shares between the company and its shareholders. It includes the number of shares sold, the price and other terms of the sale.

• Investors' rights agreements: Typically used in venture capital deals, an investors' rights agreement outlines investors' information rights, rights of first refusal and co-sale rights.

• Voting agreements: A voting agreement specifies how shareholders will vote their shares on certain issues. They are often used to ensure that founding shareholders retain control over specific decisions.

• First refusal and co-sale agreements: This type of agreement gives existing shareholders the right to purchase shares before they are sold to an outside party (right of first refusal), and it allows shareholders to join in (co-sale) if another shareholder sells their shares.

• Buy-sell agreements: A buy-sell agreement establishes a process for buying out the shares of a departing shareholder. It's often used to ensure the continuity and stability of the company.

• Stock option plans: These grant employees the option to purchase company stock at a set price. They're often used as a tool for attracting and retaining talent.

• Share certificates: A share certificate is a company-issued document that certifies ownership of a certain number of shares in the corporation.

• Board resolution approving share issuance: This records the board of directors' decision to issue new shares and outlines the terms and conditions of the issuance.