Published by LawTechie - May 9, 2011 - LawTechie

Business Start-upWith TechCrunch reporting on near daily seven figure VC infusions into start-up internet ventures, 2011 seems to be the year for entrepreneurs to stake their e-property claims. For entrepreneurs wondering what legal services a start-up business needs to get started, here is a convenient list of the top-5 we recommend to our clients:

  1. Corporate Entity Formation: Whether you choose to go the C-Corp., the LLC, or the S-Corp. route (each has its pros and cons depending on your business model), we strongly (read: very very strongly) encourage our clients to build a corporate wall between themselves and the people who will inevitably sue them. In the realm of e-business especially, where businesses are sued daily for violations of increasingly esoteric privacy rules, it is important ensure that a fatal legal mishap does not end up bankrupting the business owners.
  2. Operating Agreements / Bylaws: In the worst case, businesses go bankrupt, in the best case, they get millions of dollars in VC funding or get acquired outright. Whatever the case, business partners need a document to spell out the rights and responsibilities of every business member so that operations do not grind to a halt when partners sue each other for no other reason than because they do not have a simple document telling them how to act in the case of an unexpected contingency.
  3. Trademark: Your business name and the goodwill associated with it will become your most important asset, especially if your business owns no physical assets other than, perhaps, a website server. A trademark search and registration, even prior to starting operations, will not only help a business protect against future cybersquatting, but will also help ensure that, after spending thousands of dollars in marketing investment, the business will not receive an unfriendly Cease and Desist Letter with the subject “We were here first, so please change your name or get ready for financial wipeout.”
  4. Website Audit (a.k.a. Privacy Policy and TOS): As discussed above, legal developments in the e-privacy sector make it mucho important not only to get a privacy policy up on your site (especially when your business actively collects user info via account registrations, etc…) but also to ensure that your company follows its own stated policy. Accordingly, a one-size-fits all policy downloaded from some legal doc shop is probably not a good idea when the FTC is out on the prowl, prosecuting businesses that clearly have not read their own privacy terms. Additionally, your website’s Terms of Service is the contract between you and your customers regarding whatever service you provide. Operating a business without a clear (and relevant to your product) TOS is like opening a restaurant without a menu — at best your frustrated cooks will burn the place down, at worst your customers will sue you for not providing a service that you had never intended to provide in the first place.
  5. Web Development Agreements: Whether your e-business idea relies on proprietary info / trade secrets that you do not want your web developers blabbing to potential competitors, or you simply want to make sure that your final development bill does not arbitrarily quadruple between beta and launch, it is important to negotiate the terms of your relationship with the developers. Important clauses include payment schedules (e.g., Phase 1, Phase 2, Beta, Launch), proprietary non-disclosure agreements, and clauses to govern a smooth transition between developers should the relationship not work out.

These are only five of the most important must-haves for a start-up business and are in no way a complete list of services. In other words, as we amply hinted above, there is no good substitute for meeting with a qualified attorney and discussing your specific needs.

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.


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