5 Legal Contracts Every Startup Should Have in Place


Guest post by Tom Willis, Digital Marketing Manager, LawPath

Starting a new venture can be an exciting time, but without the right legal documents in place, your business may be exposed to avoidable risks. A common mistake made by startups is to overlook the legal needs of their business.

No matter the size or nature of your business, there are essential documents you must have in place to ensure your business is legally compliant and protected. Here are 5 legal contracts every startup should have in place.

1. Shareholders Agreement: This agreement can help you govern the relationship between shareholders of your company. You and your business partners may be on the best of terms now, but running a company may put a strain on your relationship sooner or later. A Shareholders Agreement helps protect your interests in these situations.
In the case of a disagreement or conflict, it can be very useful to have a clear idea of what the parties agreed to before the dispute, or before something changes one shareholder’s ability to continue working in the company.
It is also generally known as the Founder’s agreement. It contains vital information such as who can be a shareholder and/or serve on the board of directors, what happens in the case of a shareholder’s death or impairment, or when a shareholder files for bankruptcy, resigns, retires or is fired. It also outlines how much shares of stock are worth and who will be required to purchase the shares of a shareholder who’s leaving.

2. Non Disclosure Agreement (NDA): This agreement protects the confidential information of your business. It is used when one or both parties in a relationship wish to disclose confidential information and want to ensure that the person or organisation who has access to this information, does not disclose it to any third party without the business’s consent. NDAs can also specify the terms under which the business shares information.
There are two types of NDAs; one way and mutual. The one way NDA is the more common one. In it, the business discloses the information to another party and the party that receives the information agrees not to disclose the information. In a mutual NDA, the parties agree not to share the other’s information. This type of non disclosure agreement is generally used when two businesses share confidential information.
Keep in mind, an NDA is no use against a business or individual that has not signed up to its terms. It is important that you get your NDA in writing and signed by both parties before any confidential information is shared. This way, both parties know their duties and privileges.

3. Intellectual Property Agreement: This agreement assists you when you wish to acquire and/or sell intellectual property by assignment. Putting the agreement in black and white will help you protect your right to ownership of intellectual property by acting as evidence of assignment of intellectual property.
Assigning intellectual property is the transfer of the rights of that intellectual property from one party to another, usually for monetary consideration.
Whether you are just starting out or running a business, intellectual property is a significant piece of your business’s value. The agreement covers the assignment fee and assignment date, the rights and obligations of the Assignor and Assignee and payment, warranties, indemnities and GST. Therefore, you should make sure that the terms of the contract are clear at all stages of your business.

4. Privacy Policy – A Privacy Policy is essential for online businesses, as it outlines how your business will be dealing with client’s personal information that it collects. It informs customers how the information is collected, what it is used for and how it is stored and managed. It outlines the rights and control of a customer’s personal information.
Under Privacy Act 1988 (Cth), if your business falls within one of the set criteria outlined in the act, a Privacy Policy is required by law. You must use one if your business or company collects personal information online or directly from your customers.

5. Terms & Conditions – The website T&C’s regulate the online transactions where you sell your products or services to clients. Under the Australian Consumer Law, you are required to have Website Terms and Conditions of Use if you sell goods or services on your website, as they are needed to explain to consumers their rights when purchasing.
A well drafted Website Terms and Conditions of Use will deal with issues such as returns and refunds, consumer guarantees, deliveries, disclaimers and competitors. They will also have the effect of limiting liability for any information and material that may be on your site in relation to third party information and/or content that is included on your site. You do not want to be held accountable for information/content that does not represent your views and that you have no control over.
Additionally, it should lay down the rules for people visiting the website as well as providing protection of intellectual property (your work and ideas) on the website. They must be accessible and transparent, being attainable before a transaction has been conducted.

Having these 5 essential documents in place will help ensure that you’re not spending time and money fixing mistakes from the early days of your business. This allows you more time to build your business and focus on the things you love.

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