Collaborating before you incorporate – risks and benefits

At our Startup Law Talk workshop on September 9, 2013 we discussed the issued raised when founders work together on their startup before actually incorporating a legal entity. 

Before a tech startup is officially incorporated there is almost always an exploratory phase where one or more founders are writing code, producing business plans, and validating concepts and markets.  When more than one person is involved, the ownership status of code and other IP created during this phase is often ambiguous and misunderstandings are frequent.  Well-advised founders will have sorted out these issues with appropriate legal documentation upon formation of the company, but it doesn’t always make sense to form a company before certain fundamental questions about the proposed business are vetted.

The  following issues were covered:

  • When does it make sense to incorporate?  (How long should the exploratory period last?)
  • Ownership status of code, business plans, and other IP created by founders, volunteers, and others before incorporation.
  • What happens if the founders part ways before a company is formed.
  • We will present attendees with a basic partnership agreement that can be used as a preliminary step before incorporating and discuss the ramifications of using it.

 

East Side Incubator is located at 2711 152nd Ave NE – Building 6, Redmond, WA.

Speak Your Mind