Don't let the holidays turn into a legal hangover: Five things emerging brands should tackle now
The holiday season is a time for celebration, but for emerging brands, it can also be a season of costly legal oversights. Before you pop the champagne, make sure these five legal essentials are in order to start your new year with momentum, not a mess.
1. Get your legal structure right: Planning to raise venture capital? Form a Delaware C Corporation. If you're running a services business with no plans for VC investment, an LLC or S Corp may make more sense. Whatever you choose, qualify your company as a "foreign corporation" in every state where you have an office or employees and don't pick a formation state at random.
2. Protect your intellectual property: Make a clean break from any prior employer and ensure all pre-incorporation IP is assigned to the company. Everyone who contributes (founders, employees, consultants, and advisors alike) should sign agreements assigning their IP to the business. Then, file your trademarks and patents. Don't wait until January to protect what you built this year.
3. Document your equity properly: Keep clear records of every share issued: stock purchase agreements, payment confirmations, and board consents. If your shares vest, file an 83(b) election with the IRS within 30 days of the grant. Clean up any "promised" equity before investors start asking questions.
4. Stay compliant with employment laws: Have every employee sign an offer letter and a confidentiality and invention assignment agreement. And never assume a 1099 contractor doesn't need a contract. Proper classification and documentation matter.
5. Prepare for your seed financing: Organize your corporate records now so diligence goes smoothly later. Build relationships with investors before you need funding and focus on the partner, not just the firm, who brings domain expertise and relationships beyond the check.
Tackle these five items before the year winds down, and you'll raise a glass to a legally sound start to the new year.
