Startup Alert: 6 Agreements Every Startup Should Have

Starting a business is one thing, having the requisite agreements to protect your business is another. Sadly, in most cases, the latter is taken for granted. This article discusses the 6 essential agreements every startup should consider before commencing business operations. Still, this is not an exhaustive list but the writer’s opinion. 

These agreements include:

Articles of Association – An Article of Association in simple terms is the company’s constitution. This is the document that regulates the affairs of the company because it defines the roles and responsibilities of directors and how the members can exert control over the board of directors. This agreement can only be used by four types of companies namely: Private company limited by shares, a public company limited by shares, unlimited liability companies, and companies limited by guarantee. 

Independent Contractor Agreements – This agreement encompasses every independent contractor that was hired by the startup for any business needs. Without this agreement, the startup can be dragged into fierce legal battles by independent contractors for non-payment of salary or that they own a portion of the company because they put in sweat equity. This agreement will help streamline duties, obligations between the independent contractor and the startup.

Intellectual Property Assignment Agreements – Startup founders should ensure that every independent contractor or employee hired signs an agreement assigning the intellectual property that they create while working for the startup to the startup. Without this agreement, any individual who contributed to the creation of any product for the startup can lay claim to the product in the future.

Confidentiality Agreements – These are contracts between two or more parties in which these parties agree that certain types of information will remain confidential. While these agreements do not prevent idea theft, but they act as a major deterrent and permits the startup to enforce its rights in court by seeking compensation if there is a breach.

Non-Solicitation Agreements (NSA) – These contracts are of immense importance to any startup because they prevent former employees or contractors from taking the company’s confidential information to a competitor or using the startup’s proprietary information to set up a competing business. However, in most cases, these agreements might not be enforced for reasons such as NSA makes it impossible for the employee to earn a living or is considered too broad by the court. To ensure you are properly guided, consult your attorney for guidance in preparing an NSA. 

Shareholders Agreements – Lastly, once a startup is ready to take up outside investment, the startup needs to create a shareholder agreement that determines the rights of shareholders and define when such rights can be exercised.

While starting a business is fun, founders should prioritize creating these agreements and revising them as time goes on to secure their company’s future.

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