By CLAYTON GUTZMORE
One of the most important legal documents media entrepreneurs need to have when launching their startup is a convertible note agreement, a document that lays out repayment terms of a loan between a company and investors.
“It’s basically an IOU that can transform into different things,” said David Salmon Managing Attorney of Salmon Legal Group. “You either get paid back interest in the company or get paid back at a later date.”
Salmon was one of two attorneys who offered free legal advice at the Miami Venture Law Project, which advises media entrepreneurs. The lawyers provided participants with 10 key legal documents that every media entrepreneur should have in their arsenal when starting their companies.
More than 30 people gathered inside an office building on the outskirts of downtown Miami to hear what the lawyers had to say.
“We want to bring entrepreneurs together and bring attorneys to them in a comfortable setting to ask questions and learn,” Said Ashley Juchawski, Project Attorney for the Miami Venture Law Project.
In addition to convertible note agreements, startups should also arm themselves with:
- Formation Umbrella: A document that identifies the original founders of a business, their roles and the name of the business;
- Employee Agreement Forms: Documents that state what you pay your employees and what rights and benefits they have;
- Independent Contractor Agreement: A document that governs the responsibilities and pay for a person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement;
- Term Sheet: Identifies the critical terms of a transaction or deal;
- Non-Disclosure Agreement: A contract that outlines confidential information, material or knowledge that at least two parties wish to share with one another, but not with third parties outside of the agreement;
- Operating Agreement Checklist: A document that outlines the management structure, tax treatment, names of member managers, capital contributions, decision-making structure, and other matters for how the company will be governed;
- Stock Purchase Agreement: Forms investors fill out in order to buy shares in the company;
- Independent Contractor Rules of Thumb: Best practices freelancers and other independent contractors should follow and
- 83b: A form executives should complete in order to avoid being hit with much higher taxes long term. A Section 83(b) election must take place within 30 days of receiving the stock in a company.
According to Juchawski, entrepreneurs need to understand that online legal documents are not one size fits all. Attorneys from other companies have tailored online legal documents to suit specific companies. ”I’ve seen a lot of startups shoot themselves in the foot from copying and pasting Google’s terms of service as their own,” she said.
If you would like to learn more about the Venture Law Project, click here.