Startup Companies Checklists

Legal Entity

Select the appropriate type of legal entity early in the company’s development.

1

Outset

Select the appropriate entity type from the outset, planning for future growth and capital-raising to avoid unnecessary changes in the entity type in the future, which can be costly and time-consuming.

2

Achievement

Choose the type of legal entity that best supports achievement of the company’s and founders’ goals from legal, tax, and early-stage investment perspectives.

3

Good Fit

Be aware that entity types commonly recommended or chosen for other business types may not be a good fit for a growing startup business.

4

LLCs and Limited Partnership

Consider that limited liability companies (LLCs) and limited partnerships can be problematic for startup businesses that want to issue equity compensation or plan to get venture capital funding (in which case it is typically preferable to structure the business as a C-corporation).

5

Personal Liability

Avoid inadvertently exposing founders to personal liability. For example, partners in a general partnership have unlimited liability.

6

Business Activities

Ensure that all business activities are conducted through the legal entity, once formed, and not by an individual founder
or other third party.

Brand Names, Logos, and Domains

Clear and protect the use of brand names, logos, and domain names before creating value in them. Select each item to read more.

Clear the Rights

Clear the rights to the company’s business and brand names, logos, and domain names while the business is still in the conceptual stage.

Protect the Company’s Right To:

Use these trade designations when and where the company wants to sell its products or services; and
Prevent other people or entities with a similar business concept from using them.

Plan for Growth and Success

Plan for growth and success by filing proactively for rights protection in the US and foreign jurisdictions where the company reasonably expects to do business in the future. Startup companies should:

Make a list of jurisdictions where the company plans to operate and decide where the company can afford to file;
Take advantage of intent-to-use US trademark registration, which allows the company to register a trademark before actually using it; and
Keep in mind that the world generally works on a first to file basis. It is common practice in some areas of the world for third parties to register the trademarks of growing companies to extort cash from those companies by selling the rights to these registered trademarks back to them.

Roles and Responsibilites

Clearly agree on and properly document founders’ roles and responsibilities. Select each tab to read more.

RELATIONSHIPS

Formalize relationships between the company’s founders and avoid acting through casual business relationships (even among friends and family).

ROLES AND RESPONSIBILITIES

Set out in writing each founder’s role and responsibilities, including day-to-day operations of the business.

OWNERSHIP

Record ownership percentages among the founders and any other owners of the business.

KEY DECISIONS

Specify how key decisions are to be made (for example, capital raises and sale of the business).

DISPUTE RESOLUTION

Create a mechanism for dispute resolution between the founders (for example, how to break a tie if two founders disagree).

FOUNDER'S EXIT

Address the possibility of a founder’s exit from the business, including whether:
• the departing founder’s stock is subject to time-based vesting;
• there is any limit on the departing founder’s right to continue to hold equity stock in the business;
• the departing founder has any voting rights on business decisions; and
• any restrictive covenants govern the departing founder’s conduct after leaving the business.

IP Rights

Develop and implement a comprehensive IP strategy to ensure that the company has and
retains essential IP rights.

1

IP Strategy

A comprehensive IP strategy should cover IP creation, acquisition, and protection and anticipate business growth and expansion.

2

Core IP

Ensure that core IP contributed by founders, employees, and third parties is owned by or at least securely licensed to the business.

3

IP Protection

Determine the appropriate kind of IP protection for technology developed by the company, taking into account:
• The likelihood of obtaining that protection;
• The time and costs required to obtain the protection; and
• The protection’s length and strength

4

Trade Secret or Patent Protection

Decide, for example, whether to seek trade secret or patent protection for the company’s inventions in light of these factors.

5

IP in Early-Stage

Protect the company’s IP in early-stage business activities. For example:
• Safeguard confidential business information and trade secrets by using confidentiality and nondisclosure agreements;
• Register copyrights and use copyright notices;
• Clear and register trademarks and use appropriate notices;
• Secure rights protections for any company proprietary software; and
• Take steps to protect the company’s valuable data and databases.

6

Balance IP Protection

Balance IP protection against a desire to open source company technology.

7

Social Media Policy

Adopt a company social media policy and educate employees on how to comply with it, including who owns works created by them and whether and how they may share those works outside of the company.

8

Third-Party Content

Create a process for adequately clearing third-party content, considering what rights must be obtained, including for social media and other non-commercial uses.

Startup Company Checklist