A Startup Legal Checklist
While there are lots of legal considerations for your startup, here is a list of baseline startup issues to consider
Shareholder registers, and for Federal Companies, a register of beneficial ownership are required by law.
Depending on the nature of your business, consider entering a co-founder or shareholder agreement. These agreements can deal with important issues like:
- the management of the company;
- issuing new shares and raising money;
- hiring and firing employees;
- shareholder loans or incurring expenses;
- what happens on the resignation of a co-founder;
- the assignment of intellectual property rights;
- trigger events (death, disability, bankruptcy etc.);
- access to and control of bank accounts and spending.
For some companies (particularly tech companies) your intellectual property is your main and in some cases your only asset. Spending the time, effort and money to create an innovative product equally deserves the investment required to protect it. The stories of great products being copied by competitors are numerous. Consider what intellectual property and confidential information you have, and ways to protect it, including trademarks, patents, confidentiality agreements, copyright protection and others.
While you need to be careful with tax considerations, issuing shares or options for services is an appealing way for start-ups, and even larger companies, to attract and retain talent.
- Hold your first shareholder and directors meetings;
- Pass your initial directors’ resolutions;
- Issue shares (make sure you can lawfully issue shares under a relevant prospectus exemption);
- Enter a subscription agreement.
- Open a corporate bank account.
Federal and Ontario Provincial legislation also requires that you keep a “register of transfers” in which all transfers of securities issued by the corporation are recorded. We do this in our electronic minute books for clients. Learn more about our process here.
Aside from salary and benefits, the employment agreement is essential to address important issues like ownership of intellectual property developed or brought to the company by the employee, confidentialtiy, non-compete and non-solicitation terms and termination provisions. Often the value a lawyer adds is not just drafting your employment agreement, but advising on the circumstances around the agreement.
If you are developing a website, app or software with a development firm or contractor, make sure you are documenting your relationship with with them, including the assignment and ownership of intellectual property and confidential information.
Have you carefully considered who actually owns the domain name associated with your new business? Often individual founders register a domain name without consider whether its an asset that should be assigned to and owned by your operating business. Read our blog post on this issue here.
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