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10 Legal Steps for Your Business to Start Out in the Right Foot

When you’re starting a business, doing things right from the get-go is essential. This is a list of some of the most important legal issues that founders should know about in the process of forming their company.

  1. Make sure the corporation’s name is available in the Department of State, and preferably as a trademark and domain name. If not yet incorporating, you can reserve the name.
  2. Register the corporation by submitting Certificate of Incorporation in the corresponding jurisdiction’s Department of State. (This includes selecting a registered agent that receives essential notifications)
  3. The incorporator signs an “Initial Action by Incorporator” where he/she designates the members of the corporation’s Board of Directors.
  4. The Board of Directors approves a Unanimous Written Consent to ratify the actions taken by the Incorporator, adopt bylaws, designate the corporate officers, authorize equity to founders, and other important actions for the company to be able to do its business.
  5. The founders sign Stock Purchase Agreements and purchase their shares with money and/or Intellectual Property. (If using prior intellectual property, they should sign a Technology Transfer Agreement).
  6. When all Stock Purchase Agreements are returned signed and payments received, the corresponding Stock Certificates are sent to each founder. (If the founders’ shares are subject to vesting, file a Section 83(b) election in the IRS within 30 days of the date of the stock grant. Consult with a tax professional)
  7. The founders sign Confidential Information and Invention Assignment Agreements to commit to not disclose confidential company-related information, and to assign the founders’ work product to the company.
  8. If the corporation is doing business in a state other than where it is incorporated, register as a foreign corporation in the state where it will be doing business.
  9. File all applicable documents regarding federal and state securities laws. All equity issuances are subject to federal and state securities laws or exemptions.
  10. Obtain all federal, city, county, and state licenses and permits to do business, such as Employee Identification Number in the IRS, sanitation, and others, as applicable.

Disclaimer: This information is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Iván Ríos Mena or any affiliated entity or present or future employer, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this information should act or refrain from acting on the basis of any information included in, or accessible through, this material without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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