In the UK, there has been a 16 percent increase in tech startups. Meanwhile, the U.S. is now regarded as the largest tech market in the world with over 20 tech companies launched per year and generating over $100 million in revenue. Whether they are introducing the new wave of payment technology or transforming the use of phones in managing finances, there is no denying the tech businesses are enjoying a moment in the limelight right now- making it an exciting time for anyone launching their own tech business. However, as with launching any other business, there are certain legal requirements you should satisfy to ensure your tech business is compliant and protected. Whether it is filing to trademark your unique intellectual property or drafting your incorporation agreement, here are a few considerations when launching a tech business legally.
Draft Your Key Legal Business Documents Ahead Of Launching
There are several key legal documents every tech startup should have. If you are launching your business with partners or shareholders, a shareholders agreement is important. It outlines the protocols and agreement in the event of a partner leaving or dying. If you plan on hiring your first employees, you will also need to work on drafting an employment agreement and employee handbook. While not a legal requirement, an employee handbook helps to avoid confusion in workplace disputes and protects the company. Also, think about an incorporation agreement once you have decided on the best business structure for your tech startup.
Clarify Your Business Structure
Speaking of an incorporation agreement, you will also need to think of the best business structure for your tech startup. While the simplest option may be a sole proprietorship, you should also think about protecting yourself and your personal assets. Opting for a limited liability company can help with this. Other options include incorporating as an S-Corporation and C-Corporation. The location of incorporation also matters. For instance, incorporating in Florida can be beneficial since there is no corporate tax charged on subchapter S-corporations or limited partnerships. Similarly, on the list of Wyoming LLC benefits is the non-existence of corporate tax unless you are classed as a C-Corp. This may be a factor to consider if you have investors as many of them tend to favor incorporation as a C-Corporation due to its ‘pass through’ tax status.
Think Of How To Protect Your Tech Startup Legally
A great business idea is always worth protecting- particularly if it is a unique one. The tech world is fast-paced and there is no guarantee that there won’t be hundreds of copycat businesses like yours. However, this is just another reason why you should move to protect your tech startup from the beginning. If your tech business includes original coding or intellectual property, you can apply to copyright or patent the idea. Other ways you can protect your tech startup include using a non-disclosure agreement with employees and developers or filing a trademark for your brand. Building a successful business in any sector relies heavily on your branding.
A final note: consider seeking legal advice before incorporating your tech business or launching any products. Copyright laws date back to the 15th century and have been at the center of several significant legal lawsuits from tech giants like Apple and Microsoft in recent years. Doing your due diligence beforehand can save you and your team a lot of money, time, and heartache down the road.
While taking a tech business does take some dedication and commitment in the beginning, it can be incredibly profitable if you have a good business idea or plan. However, the chances of that are highly dependent on getting off to the right start- including legally.