Launching a technology startup is an exciting time filled with the promise of the future. As you embark on this adventure, it is critical to establish a strong legal foundation to protect the business and its intellectual property (IP). Following are four types of legal agreements that every tech startup should consider putting in place to clearly define a founder’s legal relationship to the company, to other founders/stockholders, and to outside parties with whom you conduct business.

Stockholders Agreement

A stockholders agreement is an agreement among the holders of shares in a company that is a corporation, and sets forth rights of stockholders and the company that go beyond its articles of incorporation and bylaws. An operating agreement is a similar contract among the owners of a limited liability company.  Issues often addressed in such agreements include:

  • Corporate governance: Generally, absent an agreement to the contrary, the majority owner(s) of a company controls the company because they elect the board of directors, which in turn makes major company decisions and appoints the company’s officers. A stockholders agreement often addresses how the company’s board of directors is composed, for example permitting specific stockholders to designate certain directors.
  • Special approval requirements: The agreement may also provide certain groups of stockholders with specific approvals involving significant corporate actions, such as approving the sale of the company.

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