The Bay Area has become one of the top places for startups in the country. Every year, hundreds of new founders flock to the area with the hope of becoming the next San Francisco success story. In fact, San Francisco and the surrounding areas have more VC investors and possible startup resources than anywhere else in the world. Through Priori Legal's vetted network of startup attorneys, you can interview and hire San Francisco startup attorneys who have deep experience with the full-range of issues new startups typically encounter--including formation, contracts, founders' agreements/disputes, employment, intellectual property and financing.
Incorporation is a vital first step for any new company, and the legal entity you choose can have profound ramifications as you grow.
Deciding on the ideal legal structure for your startup is the biggest part of formation.There are many options, but the following are the most common choices for startups in California.
Corporations. Corporations, more particularly C-Corporations, are the structure traditionally chosen by Silicon Valley startups, because they are most likely to get venture capital investment. Corporations are individual tax entities with limited personal liability for founders, but they require many business filings and a strict structure. To incorporate as a corporation, you can file Articles of Incorporation with the California Secretary of State.
LLCs. LLCs are more flexible structures than corporations and typically taxed as pass-through entities. LLCs have no set operational requirements, so they are popular with founders looking for operational and legal flexibility. To form as an LLC, file Articles of Organization with the California Secretary of State.
Partnerships. Partnerships are the least formal business structure commonly chosen by startups in California. Unlike corporations and LLCs, partnerships do not totally limit your liability. Partnerships are not incorporated at the state level. Instead, you must file a Partnership Agreement with the County of San Francisco clerk’s office.
Choosing the single best option can be challenging for many startups, as each have unique advantages and disadvantages. A Bay Area startup attorney can help you weigh the pros and cons of each option to decide which one is best for your current and future needs.
A formal division of original shares can be done at the time of formation through a founders agreement. Ideally, you need to establish how much of the company each founder deserves and how these shares will vest. Generally, startups also choose to specify what each founder’s responsibilities, investment, and functions will be at this time. Many startups draft more formal corporate governance documents, which can come in handy when working with investors and advisors.
Drafting Standard Contracts and Forms
Every startup needs to have standard forms to protect your company from legal issues arising with customers, employees, and your website or mobile application. After all, the common pitfalls that affect startups can be directly linked to drawing up contracts and other legal paperwork needed incorrectly. Although it’s best to customize vital contracts like venture capital investment contracts, standard documents created by a San Francisco startup lawyer will help limit your liability in everyday situations you may face as a startup.
As soon as you have grown large enough to make hires, you need employee contracts and other documentation. In fact, San Francisco labor law even requires most companies to provide new hires with employee handbooks and company policies. Without the proper employment documentation, your startup can quickly run afoul of California labor law. Startups should prepare a core group of employment documents and contracts to be signed by employees. Some things to consider with employee contracts include “at-will” offer letters, employee stock options and rights, NDAs, IRS documentation, and benefits packages and forms.
Protecting Your Intellectual Property in San Francisco
Intellectual property is vital to the business plan of just about every startup. Whether you have invented a patentable device, written code protected by copyright law, or simply want to ensure brand protection through trademark law, IP law is something every startup in San Francisco must take advantage of. Additionally, trade secrets can be secured and offered legal protection with the right IP strategy and non-disclosure agreements. Consulting with an experienced San Francisco IP lawyer is the first step towards protection.
Equity & Securities Law Compliance
Far too many startups fail to consider securities law during early issuances of stock to friends and family, but this is a big mistake. Every transaction that exchanges shares is subject to securities laws and can be reviewed by the SEC—especially if your investors are not particularly financially savvy. Your startup must consider all the relevant tax implications, disclosures, and other compliance issues at every stage.
Why You Need a Great San Francisco Startup Lawyer
A fantastic San Francisco startup attorney will help protect your company and you personally against financial losses and litigation risk -- while positioning you for maximize growth in terms of IP protection, financing negotiations and more.