5 Legal Documents Every Startup Needs
Starting a business is exciting, but it's crucial to have the right legal foundation in place. Here are the five essential legal documents every startup needs to protect itself and set up for success.
1. Articles of Incorporation (or Formation)
Your Articles of Incorporation (for corporations) or Articles of Organization (for LLCs) are the foundational documents that legally establish your business entity. This document is filed with your state and includes your company's legal name, business purpose and structure, registered agent information, initial directors or members, and stock structure for corporations.
Why it matters: Without proper incorporation, you're operating as a sole proprietorship or partnership, which means you have unlimited personal liability for business debts and obligations. Incorporation creates a legal separation between you and your business, protecting your personal assets from business liabilities.
Cost with Paralex: Starting at $150 for LLC formation, $250 for C-Corp formation
2. Founder Agreement (or Operating Agreement)
If you have co-founders, this is arguably the most important document you'll create. A Founder Agreement (or Operating Agreement for LLCs) outlines equity splits and vesting schedules, roles and responsibilities of each founder, decision-making processes, what happens if a founder leaves, intellectual property assignment, and dispute resolution procedures.
Why it matters: Most startup failures among co-founders stem from unclear expectations and agreements. This document prevents costly disputes and ensures everyone is aligned from day one. Without it, you're setting yourself up for conflict when disagreements inevitably arise.
Real example: We worked with a tech startup where two co-founders had a 50/50 split with no vesting. When one founder left after 3 months, they kept half the company. A proper founder agreement with vesting would have prevented this costly mistake and protected the remaining founder who continued building the business.
3. Intellectual Property Assignment Agreement
This document ensures that all intellectual property (IP) created for the business actually belongs to the business, not to individual founders or employees. It should cover assignment of all IP to the company, work-for-hire provisions, confidentiality obligations, and non-compete clauses where applicable.
Why it matters: Investors will conduct IP due diligence before funding your company. If you can't prove that your company owns its core technology or product, you won't get funded. Period. This is one of the first things sophisticated investors check, and missing IP assignments are a deal-killer.
Pro tip: Have every founder, employee, contractor, and consultant sign this agreement before they start working. Trying to get signatures later is much harder, and if someone refuses, you may not own the work they've already created for your company.
4. Employment and Contractor Agreements
As you grow and hire your first team members, you need proper employment agreements for employees and contractor agreements for freelancers. These should include compensation and benefits, job responsibilities and expectations, IP assignment provisions, confidentiality and non-disclosure terms, at-will employment status for employees, and termination procedures.
Why it matters: Proper employment documentation protects you from wrongful termination claims, ensures IP ownership, and sets clear expectations from day one. Misclassifying employees as contractors can result in significant penalties from the IRS and Department of Labor, including back taxes, interest, and fines that can cripple a young startup.
5. Terms of Service and Privacy Policy
If you have a website, app, or online platform, you need Terms of Service and a Privacy Policy. These documents define how users can interact with your platform, limit your liability for user actions, explain how you collect, use, and protect user data, ensure compliance with privacy laws like GDPR and CCPA, and establish dispute resolution procedures.
Why it matters: These aren't just legal formalities—they're required by law in many jurisdictions. Without them, you're exposed to significant legal risk and potential fines. Plus, app stores like Apple and Google require them before they'll list your app, so you literally can't launch without them.
Bonus: Non-Disclosure Agreements (NDAs)
While not always necessary, NDAs are useful when discussing your business with potential investors, sharing sensitive information with partners or vendors, or interviewing candidates for sensitive positions. However, it's important to note that most professional investors won't sign NDAs before initial meetings. Don't let this stop you from pitching—just be strategic about what you share in early conversations.
Getting Started with Paralex
At Paralex, we've helped hundreds of startups get these essential documents in place quickly and affordably. Our fixed-fee pricing means you know exactly what you'll pay upfront—no surprise hourly bills that can quickly spiral into thousands of dollars.
Our Founder Package includes all five essential documents plus a 30-minute consultation with a licensed attorney to review your specific situation. Starting at just $750, it's a fraction of what traditional law firms charge, and you get the same quality legal protection.
Ready to get your legal foundation in place? Schedule a free consultation to discuss your startup's needs, or get started immediately with our online platform.
