Essential Contracts For Startups
As a startup, you want to keep your employees happy and productive. Unfortunately, this can be difficult in the face of legal bureaucracy. Fortunately, by understanding the essential legal contracts that are available, you can provide a legal framework for the startup that will protect the interests of all involved, including founders, investors, employees, and partners. In this article, we explore the key legal contracts that every startup should be familiar with, such as articles of incorporation, founder/shareholder agreements, partnership/joint venture agreements, investment/funding agreements, purchasing contracts, vendor/supplier agreements, non-disclosure agreements, and employment contracts.
Articles of Incorporation
The articles of incorporation are an essential part of the legal paperwork needed to form a business. It is the document that defines the purpose of the business, the classes of shares that can be issued, and the preferred stock. The document also sets out other features of the business, such as whether the board of directors is appointed or elected, the size of the board, and who is authorized to sign the company’s checks.
Founder/Shareholder Agreements
Founder/shareholder agreements are created to outline the rights and responsibilities of the shareholders and founders. It is important to have a contract to protect the founder and shareholders in case of dispute or dissolution. This agreement is also essential to help avoid conflict during investment rounds and set out how the stake of each shareholder will be handled.
Partnership/Joint Venture Agreements
Partnership and joint venture agreements are important contracts used to establish a business relationship between companies that want to collaborate. A partnership agreement establishes the terms of using a partnership business structure. This includes how to manage disputes, how to handle profits or losses made by the company, how to make decisions, and more. A joint venture agreement, on the other hand, is an agreement between two parties who decide to form a separate business to work together for a specific purpose.
Investment/Funding Agreements
Investment/funding agreements are agreements between startups and their investors. These agreements define the rights and obligations of the investor and the startup. These documents also specify the amount of money being invested, the time frame for repayment, the terms of repayment, and the conditions required for the investor to receive returns.
Purchasing Contracts
Purchasing contracts are important documents that define the terms of the purchase between a buyer and seller. These contracts usually include the quantity of the goods being purchased, the agreed-upon price, the payment terms, delivery instructions, and other pertinent information.
Vendor/Supplier Agreements
Vendor/supplier agreements are contracts between the startup and its vendors and suppliers. These agreements allow the startup to obtain and exchange goods or services from the vendor or supplier. The agreement also lays out the rights and responsibilities of each party, details the payment schedule, and outlines the process for disputes.
Non-Disclosure Agreements
Non-disclosure agreements (NDAs) are contracts used to protect confidential information shared between two or more parties. There are two main types of NDAs: single NDA and mutual NDA. Single NDA is a contract between one party who discloses confidential information to the other, while mutual NDA is a contract used when both parties in a transaction exchange confidential information.
Employment Contracts
Employment contracts are legal agreements that set forth the responsibilities, wages, hours, benefits, and other applicable terms of the employment process. Employers should consider establishing a contract with each employee to clarify the expectations for the roles and responsibilities of each individual. The contract should include the duration of employment, the job description, methods of payment, and benefits offered.
Conclusion
When starting a businesses, it is important to have a clear understanding of the legal contracts available to protect the interests of all involved. Having the right contracts in place ensures a smooth startup operation and sets the foundations for solid business relationships. We have explored the essential contract types startups need to be aware of, such as articles of incorporation, founder/shareholder agreements, partnership/joint venture agreements, investment/funding agreements, purchasing contracts, vendor/supplier agreements, non-disclosure agreements, and employment contracts.