Introduction

Starting a new business is exciting with fresh ideas and new opportunities ready to explore. However, while innovation and strategy drive success, the true foundation of a lasting business is often less exciting, being the legal aspects which includes the relatively new Startup Act, 2022.

Your business is like a house, only with proper foundation can you guarantee its long-term stability and at the heart of this foundation is the legal documentations. Many startups focus on securing funding, building a team, and perfecting their product, but overlook legal protections which can lead to costly mistakes down the road. The right legal agreements help prevent disputes, protect your brand identity, and ensure your business is built for long-term stability.

Essential Legal Agreements

Whether you’re just launching or scaling up, understanding and securing the right legal documents can mean the difference between thriving and crumbling. Here are the essential legal agreements to help give your business solid foundation:

1. Founders’ Agreement

Defining Roles and Expectations

Startups often begin as a collaboration between friends, family members, or colleagues with a shared vision. As the people who initiate, build, and drive the business forward, you are the founders. While things may start smoothly, success can bring complex challenges.

Disagreements over roles, equity, or decision-making can lead to the downfall of promising startups. That’s where a Founders’ Agreement becomes essential. This agreements help clearly define:

• Equity Ownership: Who owns what percentage of the business, ensuring transparency from the start.
• Roles and Responsibilities: Outlines each founder’s contributions and day-to-day duties to avoid overlaps or conflicts.
• Decision-Making Processes: Establishes how major business decisions will be made, whether by unanimous agreement, voting rights, or designated leadership roles.
• Exit Strategies: Specifies what happens if a founder wants to leave, including buyout terms, ownership transfer, or restrictions on immediately joining a competing company.

Without a Founders’ Agreement, disputes over ownership, authority, and financial interests can cripple your startup before it even takes off. Putting this foundation in place from the beginning strengthens trust and ensures the long-term stability of your business.

2. Intellectual Property Protection

Own Your Ideas

Startups thrive on innovation, and your ideas are among your most valuable assets. Without proper legal protection, competitors or even former employees could copy, use, or profit from your hard work. Securing your intellectual property (IP) ensures that your business retains its competitive edge and maintains ownership over its unique creations.

Key documents here include:

• Non-Disclosure Agreement (NDA): Prevents employees, partners, or contractors from sharing your business’s confidential information, trade secrets, or strategies. This is essential when discussing partnerships, hiring new team members, or pitching to investors.
• Trademark Registration: Protects your business name or logo ensuring no one else can legally use or imitate them. A strong brand identity is an asset, and a registered trademark gives you exclusive rights.
• Copyrights & Patents: If your startup creates original content (like articles, videos, software, or designs), copyrights safeguard your ownership. If you’ve invented a unique product or technology, patents prevent others from making, using, or selling your invention without permission.

Failing to protect your intellectual property can lead to brand and lost business opportunities. Your intellectual property is your competitive edge and securing your IP early ensures that your startup maintains control, value and credibility.

3. Employment and Contractor Agreements

Set the Rules Early

As your team grows, so does your legal responsibilities. Employment Contracts and Independent Contractor Agreements help define:

• Job roles and expectations – Clearly defining what is expected from employees and contractors ensures accountability and smooth operations.
• Salary, benefits, and payment terms – Avoid misunderstandings about compensation, bonuses, and any other incentives.
• Non-compete and confidentiality clauses – This helps you prevent situation where employees from leave and immediately working for a competitor and share your sensitive business information.
• Work for Hire and Intellectual property ownership – Ensure that any work created for your company—whether it’s software, designs, or branding—legally belongs to the business.

Without these, you risk labor disputes, or former employees taking your ideas to a competitor. Having strong employment agreements from the start, helps protect not just your company but also builds a professional and secure workplace.

4. Privacy Policy and Terms and Conditions

If You Have a Website, You Need This

In today’s digital age, data protection is non-negotiable. If your startup collects customer data, whether it’s email addresses, payment details, or website analytics, properly legal foundation on the utilization and security of these information cannot be overemphasized.

Here are two key documents that every online business needs:

• Privacy Policy: This outlines how your startup collects, stores, and uses customer data. It reassures users that their personal information is handled responsibly and in compliance with data protection laws
• Terms and Conditions Agreement: This sets the rules for how customers can use your website, app, or platform. It helps limit your liability, prevents misuse, and gives you legal grounds to suspend or ban users who violate your terms. Where you offer an online service, the Terms and Conditions agreement also helps clarifies your refund, cancellation, and dispute resolution policies.

Ensuring compliance with these documents not only protects you legally but also builds credibility and trust with your customers.

5. Investment Agreement

The Deal that Shapes Your Startup’s Future

Bringing investors on board is a major milestone for any startup, but money always comes with terms. Whether you’re securing funding from venture capitalists, friends or family, a clear, legally binding Investment Agreement is essential to protect both you and your investors. This agreement defines the terms of the deal, ensuring that everyone is aligned on expectations and rights. Key elements include:

• Investment Amount & Conditions: Clearly states how much the investor is putting in and under what terms. For instance, whether you are receiving lump sum or installments, should be clarified.
• What the Investor Gets in Return: Outlines whether the investor receives equity (ownership stake) or a share of future profits, and if there are any special rights attached to their investment.
• Decision-Making Rights: While some investors prefer a hands-off approach, other may want particular rights in the business. The investment agreement helps defines whether the investor has a say in business decisions or if their role is purely financial. 
• Exit Strategy: Specifies when and how the investor can sell their stake, cash out, or transfer ownership. This prevents conflicts when investors want to exit the company.

Without an Investment Agreement, disagreements over ownership, control, and financial returns can jeopardize your business. A well-drafted agreement ensures transparency and trust between you and your investors

Conclusion

A successful startup is as much about smart preparation as it is about great ideas. While marketing plans and funding strategies are crucial, the legal framework you establish today will determine how well your business weathers challenges in the future.

From defining ownership and securing investments to protecting intellectual property, these legal documents serve to safeguard your hard work, minimize risks, and help you build trust with investors, partners, and customers.

By Efemena Ighorimoto

efemena@johnsonbryant.com

Partner at Johnson Bryant