Startup Legal Essentials: From Incorporation to Exit
A roadmap for founders to avoid common legal pitfalls in equity distribution, fundraising, and IP assignment.
Building on a Solid Foundation
Many startups fail not because of product-market fit, but because of "legal debt"—unresolved IP issues or messy cap tables that scare away investors.
Founders' Agreements
Clear vesting schedules are non-negotiable. If a co-founder leaves in year one, they shouldn't walk away with 50% of the company. Standard 4-year vesting with a 1-year cliff is the industry norm.
IP Assignment
Every line of code written before incorporation must be formally assigned to the company. Without these agreements (Proprietary Information and Inventions Assignment Agreements), the company doesn't own its core asset.
Fundraising Hygiene
SAFE notes and Convertible Notes are standard for early rounds, but understanding the dilution impact of valuation caps and discount rates is crucial. Model the cap table before signing the term sheet.