Seven Documents Every Startup Should Have From the Start

Written November 3, 2017

When launching a startup, you want to make and keep your startup as valuable as possible. In order to do that, you must ensure that

• the intellectual property is owned by the startup, and
• the co-founders who own the startup have proper incentives and rules to handle inevitable contingencies.

To accomplish this, you'll generally need the following documents

• A Charter, which sets the number of stocks the startup authorizes and par value (the minimum amount of money stock can be sold for). Par value needs to be set very low so it's affordable for the founders and so you don't receive a huge tax bill from Delaware. More details on that in another blog post, but suffice it to say that it can be the difference between an annual tax bill in the hundreds or tens of thousands.
• Bylaws, a legal document that determines the rules and regulations for the startup's internal management. Who gets to vote? How are board resolutions passed? How are officers elected? Startups often fail to draft bylaws, as they do not have to be submitted to the secretary of state, but they should not be overlooked. I've seen these seemingly small details lead to major disputes down the line.
• Stock Purchase Agreements, which issue equity shares to the founders and should include a vesting schedule. I'll detail why and how shares should be vested in another post, but it's basically to keep founders with the company and motivated. VCs don't like to invest in companies who've lost a substantial number of shares.
• Shareholders Agreement, which covers a shareholder’s right to transfer his or her shares, rights of first refusal, and redemptions upon death or disability. This is another document that's often overlooked but is vital to avoid disputes in the future.
• Technology Assignment Agreements, which transfer ownership of intellectual property that was developed before incorporation to the startup.
• Confidential Information and Inventions Assignment Agreements, which broadly assigns anything related to the venture to the company (domain names, business plans, etc.) and contains nondisclosure obligations and non-solicit obligations. -Employment Letters, which set the terms of employment for each co-founder. Again, often overlooked, but important to set the tone and manage expectations of each co-founder.