Legal for Builders

For founders planning to raise venture capital or issue stock options to employees, a Delaware C-Corporation is the only practical choice. VCs almost universally require C-Corps because the structure supports preferred stock classes, allows an unlimited number of shareholders, and is the entity type used in virtually every venture-backed startup exit. LLCs are pass-through entities that work well for lifestyle businesses, consulting firms, and businesses that will never raise institutional capital — but their tax and ownership structure is incompatible with VC investment. If you have any intention of raising a seed round or Series A, incorporate as a Delaware C-Corp from day one. Conversion from LLC to C-Corp is possible but expensive and creates tax complexity.

An IP (Intellectual Property) assignment agreement transfers ownership of any intellectual property you create — code, designs, algorithms, content — to the company rather than to you as an individual. Without a signed IP assignment, the code you write and the product you build may technically belong to you personally rather than to the entity you are trying to sell or raise money for. Investors and acquirers require clean IP assignment as part of standard due diligence. The solution: when you incorporate, sign a PIIA (Proprietary Information and Inventions Agreement) as a founder that assigns all current and future IP to the company. Every contractor, employee, and co-founder should sign one before doing any work. This is one of the highest-priority legal tasks in the first week of company formation.

A SaaS Terms of Service defines the legal relationship between your platform and your users. The sections that matter most are: Acceptable Use Policy (what users cannot do with your service), limitation of liability (capping your exposure to the amount the customer paid, not unlimited consequential damages), intellectual property (you own the platform, they own their data), data handling and privacy (GDPR, CCPA obligations), and termination provisions (how either party can end the relationship). Use a reputable template (Bonterms, Common Paper, or lawyer-drafted templates from Y Combinator) as your starting point, then customise for your specific product. Never copy a competitor's ToS verbatim — it may contain clauses specific to their business model that create liability for yours.

Equity vesting means that co-founder equity is earned over time rather than granted all at once. Standard vesting is a 4-year schedule with a 1-year cliff — meaning no equity vests for the first 12 months (the cliff), and then the remaining 75% vests monthly over the next 36 months. Without vesting, a co-founder who leaves after 6 months takes their full equity stake with them, leaving the remaining founders diluted and the company holding less equity to offer future employees and investors. Vesting protects the company from this scenario. It also aligns long-term incentives: co-founders who stay and build the business earn their equity; those who leave early do not.

You need a lawyer for: initial company formation (get this right once, it is expensive to fix later), any equity issuance (SAFE notes, priced rounds, employee stock option plans), significant commercial contracts above your acceptable risk threshold, employment agreements for early employees, and any IP or trademark disputes. Tasks you can handle with templates and tools: standard non-disclosure agreements (use the Y Combinator NDA or Bonterms), basic contractor agreements (Clerky, Stripe Atlas, or Bonterms offer solid templates), terms of service and privacy policies (GetTerms, Termly, or a lawyer-reviewed template from your sector). Budget $2,000–$5,000 for initial incorporation with an experienced startup lawyer — it is one of the highest-ROI legal investments you will make.