Legal Services for Entrepreneurs in Colorado

The Ultimate Startup Checklist

Startup Checklist

By combing the Interwebs, poring through my personal library, and applying my own experience in working with more than 100 startups, I’ve compiled this checklist of 25 items to review and consider as you launch your startup. I hope you find it useful.

  1. Decide whether starting a business is right for you and what kind of business you want to be.
    1. Are you prepared for the ups and downs of starting a business?
    2. Can you survive a lean period if income is slim for awhile?
    3. What are your primary motivations for starting your own business?
      1. Don’t feel pressured to follow anyone else’s vision of what your business should be.
      2. Whether your main goal is to achieve independence, wealth, or self esteem, make sure your motivations are aligned with your business model.
  2. Learn basic concepts of running a startup.
    1. If you want to be a fast-growing startup, read The Startup Owner’s Manual by Steve Blank.
    2. If you want to be a successful small business, read The E-myth Revisited by Michael Gerber.
    3. Additional suggested reading material:The Founder’s Dilemmas, Founders At Work, Venture Deals, Early Exits, The Lean Startup, 4-Hour Work Week, Rework.
  3. Perform initial viability assessment.
    1. Read Paul Graham’s 29 Questions to Determine if Your Business is Viable.
    2. Ask your ideal client, would you pay for this? If so, how much?
    3. Consider resources of outsourced CFO to help build a model to project how your business might unfold.
    4. Is the business something you really want to do, and for how long?
  4. Download Business Model Canvas and perform that exercise.
  5. Think of a name and consider associated trademark issues.
    1. Perform quick Google search to see if name is taken
    2. Check to see if domain is available
    3. Consider creative domain options (Galvanize.it)
    4. Perform initial trademark assessment.
    5. Search for your name on USPTO Tess database to see if available for your type of business.
    6. Consider near misses for trademark purposes (for example, just because the domain name APLcomputers.com is available doesn’t mean that you can start a business with that name)
    7. While it’s not always critical to obtain a trademark as you’re starting, it is essential that you know you have the right to use your name without violating someone else’s trademark.
    8. The only real way to know whether you are violating someone else’s trademark is to hire a trademark attorney to perform a search for you (a smart, efficient lawyer can usually help you with this for a few hundred dollars).
  6. Develop an initial brand and logo.
    1. Consider 99designs or other sites that encourage affordable competition for your business.
    2. Make sure any contractor who performs work for your brand transfers ownership of the copyright and IP to you.
  7. Make sure all the founders have the ability to work on startup free and clear.
    1. If currently employed, make sure to follow company guidelines in not working on startup on company equipment/company time.
    2. If recently unemployed or currently employed, review relevant contracts with prior or current employers to ensure that nothing you’re doing conflicts with prior commitments.
    3. Review most recent employee contract for every founder for non-compete/non-solicitation.
  8. Decide on business entity structure.
    1. Do you expect to solicit venture capital funding in the first 18-months? (If so, Delaware C Corporation probably your best option).
    2. Will you be using significant amounts of your own money to start up the business? (If so, a pass-through entity such as an LLC or an S corporation makes sense ( Read this to learn more about choosing an S Corp.) ).
    3. Do you plan to fund the business primarily with your own money or with investors’ money? (Businesses using their own money have more flexibility with LLC, businesses that rely on other people’s money, especially professional investors, should probably choose a corporate structure).
    4. If you plan to fund the business with investors’ money, and you know who those investors are, reach out to those investors to see if they have a strong preference on your business structure. Then speak with an attorney & an accountant to confirm that the investors’ decision makes sense.
    5. Do you plan to have any institutional or foreign investors? (If so, you cannot be an S corporation).
  9. Form the business and obtain foreign entity authority in any state where the company does business.
    1. Consider the tax issues of state incorporation.
    2. Consider the cost of being incorporated in a state other than where you do business.
    3. Register your business in one state.
    4. If you are conducting business in any state other than the one where you are incorporated, obtain foreign entity authority in that state.
  10. Come to terms with your team.
    1. Set aside some equity for an additional founder or to incentivize future employees.
    2. Not just percentages.
    3. Try to separate emotional and personal relationships from ownership decisions.
    4. Past contributions plus future contributions = relative ownership.
    5. Ability to contribute to future success of the business is probably most important factor in finding and rewarding team members.
  11. Set up legal ownership of business.
    1. This is an area where it is highly advisable to seek out the guidance of an attorney.
    2. For most startups, founders should obtain their ownership in the business by purchasing restricted stock with vesting schedules.
    3. For startups that choose restricted stock with vesting schedules, all founders should file an 83(b) election with the IRS within 30 days of purchasing the stock.
    4. Even for LLCs and other small businesses, owners should purchase their ownership interest in their companies at a low price to establish a cost basis in the company so that they can receive capital gains treatment for their business ownership. Failure to do so could have huge tax complications down the road for any small business owner should they later sell their business.
  12. Plan for founder departures and have a mechanism in place to quickly and effectively transition.
    1. For most startups, this should be effected through restricted stock.
    2. Can also be accomplished with a mandatory buy-sell arrangement.
  13. Get an EIN # – You shouldn’t pay for this.
    1. www.irs.gov
  14. Set up a bank account – Different credit card from personal.
    1. Keep your personal and business assets separate!!!
    2. If you run the business as if it’s another personal bank account, courts will have no problem viewing it that way, too.
  15. For corporations and other growth businesses, set up and hold first meeting of your board and shareholders.
  16. Make sure your company owns its intellectual property.
    1. IP assignment
    2. Consideration
    3. Everyone who touches the company – especially contractors and not-full-time founders.
  17. Consider patentability and potential licensing of any products.
    1. This is one of only a few items on this checklist where you absolutely need to talk to an attorney.
  18. Set yourself up to pay sales tax, and determine whether you are required to get any licenses associated with your business.
    1. The SBA has a good site for this.
    2. Colorado Business Express provides a good overview of requirements in Colorado.
  19. Consider key person insurance and insurance to buy out ownership interest in departed founder.
  20. Website & Business Cards
    1. Determine whether you need a privacy policy.
    2. If so, make sure yours complies with applicable laws.
    3. The act of creating a privacy policy makes your website subject to FCC regulation. If you don’t collect data, you don’t need a privacy policy.
  21. Pay your employees minimum wage.
    1. Required unless employee owns 20% or more of business.
  22. Consult a legal professional before you raise money.
    1. It’s smart to get an attorney involved at formation. The good ones will make the life of your startup simpler from the day you bring them on board.
    2. It’s absolutely stupid not to get an attorney involved when you’re raising capital.
    3. Without a legal background, and a securities background specifically, the likelihood of you properly complying with applicable securities laws without guidance is very close to zero.
    4. The consequences of failing to comply with securities laws range from having to return all of your investors’ money to having to go to jail. Not a good arena for playing fast and loose with the law.
  23. Find mentors and a board of advisors.
    1. Offer them up to 1% of your company.
    2. Ask them lots of questions.
    3. Listen!
  24. Develop a relationship with an accountant.
  25. At a minimum, set up a bookkeeping system.
  26. Go make money – or achieve whatever goals you have for your business!
    1. It’s nearly impossible to achieve your dreams sitting behind your computer or in your office.
    2. Get out of the office and evangelize your product to everyone you can find.
    3. Live it, love it, breathe it!

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