9 Essential Legal Documents Every Startup Needs

Three founders just lost their Series A because they couldn’t find their original IP assignment agreements. Another startup paid $100K in legal fees recreating missing board approvals. Let’s prevent these expensive mistakes.

1. Formation Documents: Your Legal Foundation 

That template incorporation filing might cost you millions later. A Bay Area startup recently discovered their Delaware certificate didn’t allow preferred stock – right when investors wanted to wire $5M. Their simple oversight delayed funding by six weeks.

Your incorporation documents define your company’s existence. Choose carefully between Delaware and California – this decision affects everything from taxes to investor expectations. Last month, a startup lost three weeks of negotiations because their California corporation needed to convert to Delaware first.

Think of bylaws as your company’s operating system. They control who makes decisions and how. One founder lost control of his company because the bylaws allowed two minority shareholders to force a sale. He used a template without understanding the implications.

2. Founder Agreements: Protecting Founder Relationships

“We trust each other completely!” That’s what every founding team says. Then something changes. Last quarter, two co-founders spent $200K fighting over equity splits that should have been documented day one.

Founder agreements prevent expensive fights. They define who owns what, who does what, and what happens when someone leaves. Real example: A startup recently avoided disaster when their agreement’s vesting provisions helped them recover equity from a departing founder who’d stopped contributing.

3. Employee and Contractor Agreements: Protecting Your Assets

Missing contractor agreements almost killed a promising AI startup’s acquisition. Their core technology wasn’t clearly owned by the company because early developers never signed proper IP assignments.

Every person touching your product needs proper agreements. California law requires specific language – those online templates often miss critical state requirements. One startup had to re-sign 30 employees because their agreements weren’t California-compliant. That’s thirty awkward conversations and significant legal fees.

4. IP Documents: Owning What You Build

Your IP drives valuation. One software startup just closed at 3x higher valuation than competitors because they had clean IP documentation. Another lost key patent rights because prior work wasn’t properly assigned to the company.

Technology moves fast, but IP documentation needs to keep pace. Record ownership before development starts. Track open source usage carefully. A recent client discovered their “proprietary” algorithm used restricted open source code. Cleaning up that mistake delayed their Series A by three months.

5. Stock and Equity Documents: Tracking Ownership

Cap table confusion kills deals faster than any other problem. Last month, a promising startup discovered undocumented promises of equity to early advisors during due diligence. Their clean $5M round suddenly became very complicated.

Stock certificates, option agreements, equity plans – these tell your ownership story. Keep them current and organized. One founder maintains a monthly equity review practice. Simple habit, but it saved them weeks of cleanup before their Series B.

6. Customer Agreements: Securing Revenue and Limiting Risk

Your customer contracts protect revenue and limit risk. A SaaS startup recently faced lawsuits because their Terms of Service didn’t limit liability properly. Another discovered their customer agreements didn’t allow product changes – right when they needed to pivot.

Update these documents as your business evolves. One fintech client reviews their terms quarterly as features change. This practice recently saved them during a customer dispute over new functionality.

7. Investment Documents: Funding Your Growth

Investment documents tell your money story. Each SAFE, note, or equity round needs proper documentation. A local startup recently lost follow-on funding because early SAFEs had conflicting terms. Simple organization could have prevented the problem.

Create a funding bible – one place tracking every investment chronologically. Makes due diligence smoother and spots problems early. One founder’s organized records recently cut two weeks off their acquisition timeline.

8. Board and Shareholder Records: Must-Have Governance

Corporate governance might sound boring, but it matters. Missing board approvals recently delayed an acquisition by months. Another startup lost key hires because option grants lacked proper authorization.

Good habits start early. Document board decisions clearly. Keep meeting minutes current. One founder records major decisions in real-time during board calls. Simple practice that saved them during due diligence.

9. Corporate Records: Staying Current with Compliance

Annual filings prove good corporate citizenship. Missing records trigger penalties and block funding. One startup recently discovered their Delaware status was void – right before a major investment round.

Think of compliance like regular car maintenance. Handle it systematically. Set reminders for filings and renewals. One CEO assigns each requirement to specific team members, reviews quarterly. This system has kept them clean through three rounds of funding.

Remember: Good documentation isn’t about paperwork. It’s about protecting your company’s future. The time you spend organizing now pays dividends later. Just ask any founder who’s been through due diligence.