Before You Launch: Essential Steps for Startup Founders
Launching a startup is exhilarating. Experienced founders know the thrill of building something from the ground up and the creative rush of turning ideas into reality.
But before you jump in, there’s groundwork to lay that will save you from major headaches down the road. Taking time to address a few critical areas before you launch will help protect your business, your relationships, and your future success.
Here’s what you need to focus on before launching your startup.
Common Legal Issues Startups Face
Set the Right Foundation: Governance and Ownership
If you have co-founders, take a step back and set up a governance structure for your company. This is more than just paperwork—this is about who gets to make decisions, who takes the risks, and who shares in the upside.
Governance Structure: Establishing clear decision-making processes is key. For example, will you have a board of directors? Who votes on strategic decisions and how are disputes resolved? Without this in place, even small disagreements can spiral out of control.
Founder Agreements: You absolutely need a co-founder agreement—to protect both the company and your relationship with your co-founders. Founder agreements lay out each person’s roles, responsibilities, and ownership. They also cover what happens if someone wants to leave.
Co-Founder Compatibility: It’s tempting to launch a company with friends or people who complement your skill set. But compatibility is about more than just skills—it’s about shared values, work ethic, and long-term vision. This is why vetting potential co-founders thoroughly is crucial. And don’t shy away from uncomfortable conversations. How will you split equity? Will someone get a salary early on? Address these issues up front.
Equity Splits: Deciding on co-founder percentages is tricky, but being thoughtful here can prevent future disputes. Remember, equity represents ownership, and with ownership comes control. If you split things 50-50 without thinking it through, you could end up in a deadlock when you need to make a critical decision.
Pro tip: Vesting schedules are a must to ensure no one walks away with a huge chunk of equity after a few months of work.
Avoid Accidental Partnerships
One common mistake founders make is stumbling into an accidental partnership. It’s easier than you think. For example, you’ve been working on a project with someone for months, splitting responsibilities without any formal agreement. Guess what? You might already be in a partnership—even if you didn’t mean to be.
An accidental partnership can lead to major legal and financial liabilities. If things go wrong or you end up in a dispute, your “partner” might have a claim to your business or its profits. The solution? Set up clear agreements early on, even if it feels premature.
Naming Your Company: A Brand Starts with a Strong Name
One of the most exciting parts of launching a company is choosing a name. But before you do, we recommend you take these steps to protect your new name.
Check Availability: The first step is simple—make sure no one else is using the name. Run a search with the USPTO to check whether the name is already trademarked. A simple Google search can also help spot potential conflicts. The last thing you want is to pour time and money into building a brand, only to find out someone else is already using your name.
Trademark Strength: Not all names are created equal. Names that are fanciful or arbitrary—think made-up words like “Google” or seemingly unrelated names like “Apple”—get the strongest trademark protection. Descriptive names, on the other hand, are harder to protect. Choose a name that’s unique, memorable, and gives you a strong footing if you ever have to defend it.
Add to Cart: Once you’ve settled on a name and confirmed it’s available, take steps to protect it. Register your domain, file for a trademark, and grab the social media handles. It’s much easier to secure everything at the start rather than trying to claim it later.
Protect Your IP Early On
Your intellectual property may be your company’s most valuable asset. Whether it’s a unique product, a proprietary process, or even your brand, protecting your IP from the beginning is essential.
Trademarks: As mentioned above, your company name and logo should be trademarked to prevent others from using them. But trademarks can also apply to other parts of your business, like product names or slogans. The stronger your trademark portfolio, the harder it will be for competitors to infringe on your brand.
NDAs: When discussing your idea with potential investors, employees, or contractors, it’s tempting to ask them to sign a non-disclosure agreement. While NDAs can offer some protection, they aren’t a silver bullet. They can be hard to enforce, especially when it comes to broader, more general ideas. And investors generally consider NDAs at the pitch stage to be poor form. So while they are helpful in many cases, don’t rely on them as your only form of protection.
Patents: If your company is built around an invention or a unique process, consider filing for a patent. This can be a costly and time-consuming process, but it may be worth it to protect your IP in the long run. Make sure you consult with a lawyer to determine if a patent is the right path for your business.
Minimizing Co-Founder Disputes
Co-founder disputes are one of the leading causes of startup failure. Even if you’ve picked the right person and have a solid founder agreement in place, conflicts will happen. The key is to manage them before they escalate.
Clear Roles and Expectations: Many disputes come from a lack of clarity. Who’s in charge of what? What happens when there’s a disagreement? Make sure you and your co-founders have clearly defined roles, and revisit these as the company grows.
Regular Check-ins: Communication is critical. Regularly check in with your co-founders to ensure you’re aligned on the company’s vision and goals. These check-ins also provide an opportunity to address small issues before they become major problems.
Dispute Resolution: Have a plan for how to resolve disputes. Will you bring in a mediator? Does one co-founder have final decision-making authority on certain matters? Thinking through these scenarios now can save a lot of grief later.
Top 5 Legal Must-Haves for Startups
Before You Launch: Think Long-Term
Before you get caught up in the excitement of launching your company, take the time to lay a solid legal and strategic foundation. That means setting up a governance structure, protecting your IP, securing your brand, and preventing potential conflicts with co-founders. It’s not the most glamorous part of starting a business, but it’s essential to building something that will last.
The steps you take now will determine whether your company is built on a solid foundation or quicksand. So take the time, ask the hard questions, and approach your launch with confidence, knowing you’ve set your startup up for success.