Legal

Legal

Legal frameworks for startup founders. Not legal advice — frameworks to understand what you need and when to get a real lawyer.

IMPORTANT DISCLAIMER: This skill provides general frameworks and checklists. It is NOT a substitute for qualified legal counsel. Always consult a lawyer for your specific situation.

Keywords

Legal, contracts, terms of service, privacy policy, entity structure, incorporation, IP, NDA, employment agreement, equity, vesting, GDPR, compliance, regulatory, licensing, LLC, C-corp, Delaware, trademark, patent, copyright, data protection, CCPA

Core Domains

1. Entity Structure

When to incorporate:

• Before accepting money from anyone
• Before hiring anyone (including contractors)
• Before launching commercially

Entity comparison:

Factor	LLC	C-Corp (Delaware)	S-Corp
Fundraising	Hard (VCs don't invest in LLCs)	Standard for VC	Not VC-compatible
Taxes	Pass-through	Double taxation	Pass-through
Equity	Complex membership units	Simple stock	Limited shareholders
Best for	Lifestyle business, consulting	VC-backed startup	Small profitable business

Default recommendation for VC-track startups: Delaware C-Corp.

Why Delaware?

• Most VCs require it
• Well-established corporate law
• Chancery Court specializes in business disputes
• Standard templates (NVCA) assume Delaware

2. Contracts & Agreements

Essential contracts by stage:

Stage	Must Have	Should Have
Pre-seed	Co-founder agreement, IP assignment	NDA template
Seed	+ Employment agreements, contractor agreements	+ Advisor agreements (FAST)
Revenue	+ Terms of Service, Privacy Policy, DPA	+ MSA, SLA
Series A+	+ Stock option plan, board consents	+ ROFR, D&O insurance

Co-founder agreement must include:

• Equity split and vesting schedule (4 years, 1 year cliff standard)
• Roles and responsibilities
• IP assignment to company
• What happens if someone leaves
• Decision-making process (voting, deadlocks)
• Non-compete and non-solicitation

Contractor vs Employee:

Factor	Employee	Contractor
Control	You control how/when they work	They control how/when
Equipment	You provide	They provide
Exclusivity	Usually exclusive	Can work for others
Benefits	Required	Not required
Tax	You withhold	They pay self-employment
IP	Usually work-for-hire	Must have IP assignment
Risk	Misclassification is expensive

3. IP Protection

IP types for startups:

Type	What It Protects	Cost	Timeline
Trademark	Brand name, logo	$250-1500	6-12 months
Copyright	Code, content, designs	Free (automatic)	Immediate
Patent	Inventions, processes	$5K-15K+	2-4 years
Trade secret	Proprietary info, algorithms	$0 (process cost)	Ongoing

IP assignment is critical:

• Every founder must assign IP to the company
• Every employee must sign an invention assignment agreement
• Every contractor must have an IP assignment clause
• If you skip this, you don't own your own product

4. Compliance & Data Protection

GDPR essentials (if you have EU users):

• Lawful basis for processing (consent, contract, legitimate interest)
• Privacy policy explaining what/why/how you process data
• Data processing agreements with all vendors
• Right to access, rectify, delete (user requests)
• Data breach notification (72 hours)
• Data Protection Officer (if processing at scale)

CCPA essentials (if you have California users):

• Right to know what data you collect
• Right to delete
• Right to opt out of sale
• Updated privacy policy with CCPA disclosures

General compliance checklist:

• Privacy policy published and current
• Terms of service published and current
• Cookie consent mechanism (EU)
• Data processing agreements with vendors
• Data retention policy defined
• Security incident response plan
• Regular security reviews

5. Equity & Compensation

Standard vesting:

• 4-year vesting, 1-year cliff
• Monthly vesting after cliff
• Single trigger acceleration (sometimes)
• Double trigger acceleration (sometimes for founders)

Option pool:

• Typical: 10-20% of fully diluted shares
• Created pre-money in fundraising (dilutes founders, not investors)
• 409A valuation needed for strike price
• ISO vs NSO: ISOs are tax-advantaged for employees

Advisor equity (FAST agreement):

Involvement	Standard	Strategic	Expert
Idea stage	0.25%	0.5%	1.0%
Development	0.15%	0.35%	0.6%
Revenue	0.10%	0.25%	0.5%

2-year vesting, no cliff is standard for advisors.

When to Get a Lawyer

• Always: Fundraising (term sheet review, closing docs)
• Always: Hiring first employees (employment law varies by state/country)
• Always: If someone threatens legal action
• Probably: Before launching (ToS, Privacy Policy review)
• Probably: International expansion (local law varies significantly)
• Maybe: Standard contractor agreements (templates often sufficient)

Reference Files

• references/contracts.md — Contract templates, negotiation frameworks, red flags
• references/entity-structure.md — Incorporation guides, entity comparison, Delaware process
• references/compliance.md — GDPR, CCPA, data protection, security compliance