Startups

What legal steps should a startup take first?
A startup’s first legal steps usually include choosing and forming the right entity, putting a founders’ agreement in place (with equity and vesting terms), and assigning all intellectual property to the company in writing. Handling these early prevents disputes that can derail the company later.

What’s the best business entity for a startup that plans to raise investment?
Startups planning to raise from professional or venture investors commonly form a corporation (often a Delaware C-corporation) because investors are familiar with its stock structure. Bootstrapped or lifestyle businesses often prefer an LLC for flexibility. The right choice depends on fundraising and growth plans.

Do startup co-founders need a founders’ agreement?
A founders’ agreement is strongly recommended. It defines each founder’s ownership, roles, responsibilities, and what happens if a founder leaves — including equity vesting. Without one, an early departure or disagreement can create serious ownership and control problems.

How do I protect a startup’s intellectual property?
A startup protects its IP by having all founders, employees, and contractors assign their work to the company in writing, using NDAs where appropriate, and registering trademarks for its brand. Unassigned IP is one of the most common problems investors flag during due diligence.

What is equity vesting, and why does it matter?
Equity vesting means a founder or employee earns ownership over time — often over four years with a one-year “cliff” — rather than owning it outright immediately. Vesting protects the company and remaining founders if someone leaves early, and investors typically require it.

Do I need a lawyer to raise a funding round?
Raising a funding round involves securities laws and documents — term sheets, SAFEs or convertible notes, and equity agreements — where mistakes can be costly or hard to reverse. Legal counsel helps structure the round and keep it compliant. Capital Partners Law represents founders through financings.

What’s the difference between a SAFE and a convertible note?
Both SAFEs and convertible notes are early-stage instruments that convert into equity later, but a convertible note is debt — it carries interest and a maturity date — while a SAFE is not. Which is appropriate depends on the company’s stage and what investors expect.

How do startups give equity to employees?
Startups typically grant employee equity through an equity incentive plan, most often as stock options, with terms such as vesting schedules and an exercise price. Structuring the plan correctly has important tax and legal consequences for the company and the recipients.

What legal mistakes do startups most often make?
Common startup legal mistakes include relying on handshake deals with no written agreements, failing to assign IP to the company, choosing the wrong entity, omitting equity-vesting terms, and ignoring securities rules when raising money. Most are far cheaper to prevent than to fix.

Can a startup lawyer help beyond formation?
Yes — Capital Partners Law works with founders from formation through financing and growth, scaling its involvement as the company evolves.