5 documents I need to start a tech business

There are documents you need to start a tech business, and those that lawyers want to sell you.

They are not always the same thing.

Before we move on to talking about the law, two pieces of advice from me wearing my entrepreneur hat.

Most lawyers are not entrepreneurs, but I am.

1. Before you spend lots of money on documents, make sure your idea is a good one. Find some validation, some traction, anything. Buying legal services or incorporating a company can feel like something 'achieved'. But it is also pointless if you go in too early.

2. At the early stages when you start a tech business, your legal risk and exposure is low. If someone sues your company when it has no money to pay them back, more fool them. So you want to improve your documents as you go. You don't need gold plated documents right from the start. You probably cannot afford it.

1. NDA

The non-disclosure agreement. As a rule of thumb, you should get used to sending one to third parties before you disclose your idea to them (especially any algorithms etc). Depending on the situation, you will either need a fairly simple NDA or a more detailed document covering more eventualities.  

2. IP Assignment Agreement

If you have a company, avoid any doubt or disputes about who owns what and assign your IP to the company. They don't have to be complicated, but if you get this sorted early on you can avoid disputes between founders who think they 'own' the IP.

3. Articles of Association and Shareholders' Agreement

Strictly two documents.

But when you set up the Company you get the articles 'for free' from Companies House. The articles are the constitution of the Company and set out things like how directors make decisions. The standard 'model articles' will do for early stages. When you get investors you will need to change them to take on board their requirements.

Until then, your bespoke requirements between founders should be dealt with in the Shareholders' Agreement, which governs (obviously) the relationship between shareholders. In early stages this document can be simple - a list of agreed points is infinitely better than nothing.

The important point - and this cannot be emphasised enough - is to TALK to your cofounders and LISTEN to what they say. I do not like capital lettering but this mistake is made all the time. Conflicts arise from a lack of talking and listening.

Drafting a shareholders' agreement, particularly with the help of a lawyer, can really help flush out the issues. Should founders be able to transfer shares to a spouse? What happens if one founder doesn't do any work? What happens if one of the founders dies? Get it in writing and you'll reduce scope for arguments later.

4. SaaS and Service Level agreements

Got some clients? Great! First hurdle jumped. Now you'll need a contract with them. Software as a (Subscription) Service agreements are standard nowadays, and most tech products are sold in this way. 

To start off with the buyer will probably be able to dictate terms (or will want to feel like it can!). The important thing is to start with a decent document to send them - you will then see the amendments they make.

For the next client you will see their lawyers make a completely different set of amendments (lawyers are annoying like that...).

The important thing is to learn - what is commonly requested. What can you live with? What is vital to your business?

Often the crucial clauses are payment terms, practicalities on numbers of users, sub-licences, limitations on your liability and of course details of service levels that you should provide. The service level agreement can either be included as a schedule or be a standalone agreement.

Either way - it is important so that you and your clients have the same expectations. Otherwise conflict looms!

5. Policies to start your tech business

You can't employ someone without insurance and it's a good idea to have a privacy policy and a grievance and disciplinary policy too. These can be basic to begin with. The key thing is to think about what the document is for - to reduce scope for conflict with your employees.

In order to comply with UK GDPR you will need a data protection policy and a cookie policy on your website. What happens if you don't? Well, in the early days, probably not much. But general counsels of clients will want to see you handling their data properly (because they have responsibilities to their own clients and customers). If you are proactive you will be much more convincing and head off process questions before they are even asked.

The important thing, as always, is to think about what data protection actually means. The document is useless without actual respect for the data you are holding.

So, those are the 5 (ish) documents needed to start a tech business.

Hopefully what has come across is not the importance of the document per se, but thinking about why you might need a document.

You want to avoid conflict, you want to look good in front of clients. To begin with you can do that in a low cost way, and as you grow (and the risks grow with them) you will need to solidify your documents.

We can help guide you through the early stages.

And then, when you are ready, help with those crucial discussions, negotiations and ultimately drafting.