Four strokes to keep your start-up company away from the law.

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"Editor's note" the author of this article Matthew Faustman,upcounsel.com, a founder and CEO of a company that provides legal advice to start-up companies.

Matthew Faustman has been dealing with startups for so many years that many startups have made some legal mistakes, and many of them are the same. As a result, he sorted out the most common mistakes of four points for later entrepreneurs to learn from.

Error one: No share rights plan (vesting schedule), no corresponding intellectual property confidentiality agreement

When someone quits in the middle of a start-up and continues to hold a stake in the company, the rest of the team is forced to do so, and you may end up trying to make a wedding dress for someone else. The implication of the plan is that even if someone withdraws, the remainder can buy the shares of the person first. The advantage of this is that the people who can motivate the entrepreneurial team can get together and spend the hardest years of starting a business.

One of the other fatal effects of the withdrawal may be that the person who left may take away some of the core intellectual property assets, possibly including patents, codes, logos, trade secrets, etc. Signing a confidentiality agreement can give the founding team a guarantee, and it doesn't take a lot of effort to make a list of what should be kept confidential, and each core member will sign it.

Mistake two: Sign an agreement in a muddle

Some founders don't even look closely at the agreements they are signing, let alone understand the content of the agreement. To say that they are naïve or that they are not understanding enough, many founders lack the sense of responsibility for their signature.

The consequence of not looking at the agreement is that you have personally ruined the right to negotiate certain core terms and will eventually pay a higher price than you expected. An excellent example of this is that if a contract is to be terminated prematurely, the party that usually ends it has to pay a high penalty, which may not be carefully considered by many entrepreneurs when they sign an agreement.

So, if you're going to sign an agreement on behalf of a team, make sure you've read it and fully understand the content of the agreement. How do you understand? 1, to clarify their rights and obligations, 2, see the additional terms or restrictions, 3, clear each person's intellectual property rights.

Mistake three: Be indecisive on the question of whether to dismiss the unsuitable employees

For a start-up, there's nothing more fucked up than hiring a jerk. What's killing them is that they don't write "bastards" on their faces, they sometimes have a good resume and look like a decent guy, but if they are hired then they will be exposed to their true colours. And, this kind of person will bring you legal trouble, they found that they have been a little bit of a treat to go to court.

Fried people, for some entrepreneurs may not be able to pull face. But are you a face-saving or a company?

Meet this kind of person, must take the decision, seize the opportunity to dismiss decisively. Keeping this kind of person will make your company a mess and increase your chances of encountering legal problems.

Error four: Did not put the important interest relations into the contract

Successful companies have one thing in common: the rights and responsibilities of any interested party are clear. For early startups, the most important thing to do with the contract is the relationship with the contractor, because the contractor has the ability to help you carry out some difficult matters, but if you do not have a paper agreement, the other party does not have this obligation.

Any interested parties should sign a written agreement, because they sometimes need you, you need them at some point, a paper agreement can guarantee the interests of both parties, and reduce the possibility of disputes.

With a little more common sense, raising your awareness of the law can help you stay away from unnecessary legal issues and allow your company to go further.