Ducks in a Row Part 1: Standard Contracts and Policies Every Startup Needs
Early-stage startups often prioritize growth and product development over administrative tasks. However, establishing fundamental legal documents and policies early is crucial to minimize risk, comply with regulations, and build investor confidence. Below are essential standard agreements and policies every startup should implement early on.
1. Website Terms & Conditions (T&Cs)
Your website’s Terms & Conditions clarify the rules for visitors using your site:
Define acceptable use and restrict prohibited actions.
Clarify limitations of liability related to your website.
Establish your intellectual property rights clearly.
Transparent T&Cs protect your startup from unnecessary legal disputes and inform visitors of their rights and responsibilities.
2. Privacy Policy
A comprehensive Privacy Policy is legally mandatory in most jurisdictions, especially with laws like GDPR (Europe) and CCPA (California):
Disclose how your startup collects, processes, and protects user data.
Explain users’ rights regarding their personal information.
Clearly state compliance measures related to data security.
Address whether and how you use cookies and other tracking technologies.
3. Mutual and One-Way NDAs
Non-Disclosure Agreements (NDAs) protect your confidential information during sensitive business discussions:
Mutual NDA: Ideal when both parties exchange confidential information, common in partnerships or collaborative discussions.
One-Way NDA: Suitable for pitching your ideas, services, or products to potential customers, investors, or contractors without reciprocal disclosure.
NDAs build trust and clarity, ensuring information shared remains protected. Having templates you are comfortable with in your back pocket can save time and also enable you to “use your paper” when an NDA is called for.
4. Template Contracts for Products or Services
Establish standard contracts for selling products or services:
Define clear terms regarding scope, delivery, payment, warranties, and liability.
Streamline negotiations and reduce risk by consistently applying uniform terms.
Prepare a go-to-market Master Services Agreement and/or SaaS agreement that interfaces well with your customers alongside a template Order Form to house client-specific terms
Be prepared to create industry-standard Service Level Agreements (SLA’s) and other deliverable metric addendums to ensure full coverage of services is papered to your customer or business partner
Be equipped with a template Memorandum of Understanding and Letter of Intent documents. Often prospective clients will wish to enter into non binding MOUs or LOIs to create a framework and launch pad for a potential partnership or contracting relationship
Creating well-structured templates helps avoid ambiguity and expedites your sales processes.
5. Intercompany Agreements
For startups operating multiple legal entities (domestic or international), intercompany agreements clearly document transactions and obligations between entities:
Provide clarity regarding shared services, intellectual property usage, and financial arrangements.
Reduce audit risks and ensure regulatory compliance.
Additional Essential Documents
Employment Agreements
Clearly outline employee roles, compensation, equity incentives, confidentiality, and non-compete clauses.
Contractor Agreements
Define project scope, payment terms, intellectual property ownership, and confidentiality expectations.
Understand the key differences of independent contractor agreements vs W-2 employees and the differing sets of obligations and tax consequences of each
Equity and Option Agreements
Precisely document equity grants or options to founders, employees, and advisors.
Leverage services such as Carta and Pulley to ensure any cap table developments are accurately captured and codified
Maintaining Good Document Hygiene
Regularly review and update your contracts and policies to stay compliant with evolving laws and business practices.
Store contracts centrally and securely, making them easily accessible for audits or due diligence processes.
Conclusion
Implementing these foundational contracts and policies early can significantly reduce future risks and create a solid legal foundation for your startup. Stay tuned for Part 2 of "Ducks in a Row" for additional tips on advanced contract management and compliance.
For startup-focused legal assistance and custom-tailored documentation, reach out to the team at Runway Legal.
Disclaimer: This article is intended for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship with Runway Legal.