How to Handle Startup Legal
Without a Full-Time Lawyer
Legal is the area where founders most reliably either overspend (hiring lawyers for things templates handle) or underspend (skipping documents that create expensive problems later). Here’s where to spend, where to use templates, and what to never do without proper legal review.
- The documents every startup needs from day one
- When to use a lawyer vs when to use a template
- Finding and working with a startup-specialised lawyer
- Customer contracts — what to include and what to fight for
- IP protection without a legal team
- Employment agreements and contractor agreements
- The legal audit before your Series A
The Documents Every Startup Needs From Day One
Co-founder agreement: if you have a co-founder, this is the most important legal document you’ll ever sign — more important than your incorporation docs. It should cover equity split, vesting schedule, decision-making authority, what happens if one founder wants to leave, and how you resolve fundamental disagreements. Most co-founder splits that end in litigation or company damage could have been prevented by a clear co-founder agreement signed at the beginning.
Incorporation: incorporate before you take money, hire anyone, or sign a significant customer contract. In Canada, a federal or provincial corporation. In the US, a Delaware C-Corp if you’re planning to raise VC. The choice of entity affects your ability to raise institutional money, issue stock options, and structure future investment rounds. This is one of the few legal decisions worth paying a startup lawyer for upfront.
IP assignment agreements (PIIAs): every founder, employee, and contractor who touches the product should sign a PIIA that assigns their work product to the company. Missing PIIAs are one of the most common diligence flags at Series A and acquisition — and they’re almost always because someone forgot to get the signature early, not because of a genuine dispute. Do this for everyone, from day one, without exception.
Privacy policy and terms of service: required the moment you launch publicly and collect any user data. Not optional, not “we’ll add it later.” GDPR, PIPEDA (Canada), and CCPA (California) all have real penalties for non-compliance. Template-based policies from reputable sources (Termly, Iubenda) are acceptable at seed stage and far better than nothing.
The legal document founders most often skip and most often regret: the co-founder agreement. By the time the relationship is stressed enough that you need it, it’s too late to negotiate it fairly. Sign it when things are good — when you’re both excited about the company and genuinely aligned on the terms. That’s the only time you can draft it without the negotiation being adversarial.
When to Use a Lawyer vs a Template
Always use a lawyer: incorporation, investment documents (SAFEs, convertible notes, term sheets), co-founder agreements, any contract above $50K, employment terminations, and any situation involving potential litigation or IP disputes.
Templates are usually sufficient: standard customer MSAs and SOWs for initial contracts under $25K, NDAs (the standard mutual NDA is almost always fine), contractor agreements for short-term project work, and basic HR policies. Use reputable template sources — Y Combinator’s open-source docs, Bonterms, Clerky, or jurisdiction-specific template banks from startup law firms who publish them as lead generation.
The middle path: use a template as a starting point, then have a startup lawyer review it before you send it to a significant customer or sign it yourself. A one-hour review from a startup lawyer ($300–600) on a contract where you’ve done the drafting is much cheaper than having them draft from scratch ($1,500–3,000) and catches the gaps that templates routinely miss for your specific situation.
Finding a Startup-Specialised Lawyer
General commercial lawyers are not startup lawyers. The difference: startup lawyers know SAFE mechanics, standard VC term sheet provisions, equity plan structures, and the specific diligence issues that come up at Series A. A general commercial lawyer will charge you to learn these things on your file.
How to find one: ask your investors (they have established relationships and can often negotiate preferred rates), ask other founders at similar stage, and look for firms that publish startup-specific content and templates — this signals they understand the space. In Canada: Osler, Gowling, and a handful of boutique startup practices. In the US: Cooley, Gunderson, Wilson Sonsini, and many boutique firms. Most offer deferred billing for early-stage companies — legal fees paid at the close of your first institutional round.
Customer Contracts — What to Fight For
The terms that matter most in a customer contract: IP ownership (you must retain ownership of your product and any improvements — customers sometimes try to claim IP in custom-built features), liability cap (limit your liability to the amount the customer paid you, not to consequential or indirect damages), data processing agreement (required for any customer where you handle personal data), and termination rights (you want the right to terminate for non-payment with 30 days’ notice, not to be locked into multi-year contracts without an out).
What to accept: standard indemnification clauses, reasonable audit rights, and confidentiality provisions that go both ways. What to push back on: unlimited liability, customer ownership of any product improvements, perpetual licences with no ability to revoke, and any clause that gives a customer veto rights over your other customer relationships or product direction.
The Legal Audit Before Series A
Run a legal audit 3–6 months before starting the raise. Check: all employee and contractor PIIAs signed, cap table fully documented and reconciled, all previous investment documents filed, no material contracts missing signatures, privacy policy and ToS current and compliant, no outstanding disputes or threatened litigation. Fix anything you find before investors find it — a legal gap discovered during diligence creates doubt disproportionate to its actual severity.
“Review this customer contract for a SaaS startup and flag any terms I should push back on. [Paste the contract or the key clauses.] Specifically: (1) Any IP ownership clauses that could give the customer rights to my product or improvements, (2) Any liability provisions that are unusual or unusually broad, (3) Any termination rights that are one-sided, (4) Any data handling obligations I need to flag for my privacy counsel, (5) The 2–3 most important changes I should request before signing. Note: I understand this is not legal advice — I’ll verify with my lawyer before signing. I just want to understand what to ask about.”
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