Top 3 Legal Documents Every Startup Needs

By Chris Combs

Founding a company and launching a new product into market is one of the most rewarding and exciting things you can do. When the company is formed, documents are created to address operation of the corporation, stock options, and capitalization. But those documents usually not enough, especially if you are selling a product to other businesses (B2B). Your startup will need several key legal documents to bring on its first customers. He’s a quick overview of three key legal documents you will need.

1. Terms of Service

The Terms of Service (TOS) governs the use of a product and services provided by it. Think of these as the rules that one must agree to and abide by in order to use a service. Let’s take a look at an example with passwords. The user is in charge of maintaining the confidentiality for their own password. The company wouldn’t be liable for any damage if you used a password that ultimately resulted in your account being accessed without your authorization. Some of the other topics worth noting within a Terms of Service are the following: Limitation of Liability, warranty, termination and intellectual property. You can check out our terms of service located here.

2. Privacy Policy

A Privacy Policy is a document that discloses some or all of the ways a user gathers, uses, disclosed and manages a customer’s data. It’s normally seen cited with the Terms of Service but usually a separate document. It covers what information is collected, how that information is used and if that personal information is transferred to anyone. In addition this document covers how information is protected and the extent of responsibility for the company. Have a peak at LinkSquares Privacy Policy here.

3. Service Level Agreement

The Terms of Service and Privacy Policy are documents that govern the business relationship between a customer and a company, but it doesn’t explicitly mention what service the company will provide. The Service Level Agreement (SLA) is the contract between a company (who is providing a service) and the end user, that defines the level of service expected. If you’re a web application using a Software as a Service (SaaS) delivery model, this document covers the topics related to use of the application such as:

  • Availability - This is a percentage of a year that the app will be available to use. So think about it like a year contains 525,600 minutes. What percentage of that total will the application be down for? So if a provider says 99% availability, that means in total for a year, that’s 5,256 minutes or 87.6 hours. You might think that’s a lot, but if you spread that out over 52 weeks that’s about 1.6 hours weekly. In addition to system outages due to a problem that are covered within these 87.6 hours, there’s also regularly scheduled system maintenance that’s normally scheduled off normal hours.
  • Backups - Defines how often the application is backed up, retention of the backups and the restore obligations and processes. This is important for larger businesses that have compliance and security procedures they have to follow to purchase any cloud-based application.
  • Support - This section defines what the company will do if problems and errors are found within the application. This includes communication channels, mitigation plans, response times and processes.

As your startup grows, there may be requirements to create additional agreements to further define the business relationship between the company and its customers. That includes documents like a Non-Disclosure Agreement to protect company IP, an End User Licensing Agreement to define what is being licensed to the customer and also a Master Services Agreement which defines the future transactions that will be performed.

Generally, the best place to start is to not mistake this for legal advice and consult with a licensed attorney who can help you. There you can talk through what your startup may specifically need and get the documents customized based on your business. Most lawyers will do an initial meeting and consultation for free to get to know you. Take advantage of that and have a few different conversations before picking a lawyer and getting down to work. Best of luck!

Topics: legal sales operations