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How to establish a startup and draw up your first contract

Founders are encouraged, incentivized and pressured to begin transacting with customers as quickly as possible to drive growth and revenue. But making legal mistakes early in the game can create costly liabilities down the road.

That’s why we invited James Alonso from Magnolia Law and Adam Zagaris from Moonshot Legal to join us at TechCrunch Early Stage to give us a 360 overview of the legal side of running a startup. We’ve shared highlights from their presentations below, along with a video of the entire panel discussion.

Corporate law 101 for startup founders

James Alonso gave us a presentation on company formation and getting funding. Maybe you’ve already created your startup, but if you’re still working on your own and don’t have any clients or employees yet, these tips are essential before you get your startup off the ground.

When you’re setting up a new company, it forces you to have a discussion about capital structure — who owns shares, how many shares and what kind of shares. There isn’t a single way to design a company on this front and we’ll look at some options later in this article. And because you’re starting a startup, you want to structure your company in a way that makes future financing easy.

Setting up a company also lets you put your IP in a single entity that you’re sharing with other shareholders. “One of the key things you’re doing when you’re forming a company is assigning the IP related to that company into a single entity that holds it all,” Alonso said.

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