7 Things to Consider Before Launching Your Tech Business
Photo by Marvin Meyer on Unsplash
There is no shortage of advancement in the world of technology. Tools like ChatGPT are revolutionizing the way many people do business. They demonstrate that the market for tech is still wide open.
Today’s article is inspired by a recent conversation with someone hoping to bring their idea for an app to life. This individual wants to start off on strong legal footing, but is unsure of where to begin.
Here’s a quick list of some considerations for app creators and tech startups to think about when launching a new venture. Of course, this is not an exhaustive list of what someone needs to do when building and starting a tech business, but it can help get you started in the right direction.
1. Select and setup the proper business entity: It is generally a good idea to start with setting up your business entity to help protect you and your business partners from any personal liability. Also, if you plan to seek out investors, then it is important you have your business entity formed prior to taking any investment funds. Having a business entity allows you to open business bank accounts and credit cards in the name of the business and keep the business assets and liabilities separate from your personal assets and liabilities. Consult with an attorney to determine what business entity (e.g., a limited liability company, C Corp, non-profit entity, or public benefit company) best suits your needs. You should also consult with a CPA to determine whether that type of business entity is appropriate for the type of tax treatment that you would like your business to receive, or whether there are any tax elections you should make (e.g., whether you may want to your business entity to be classified as an S Corp).
2. Prepare a partnership or operating agreement: This is an extremely important step. If you have one or more business partners, you should have a partnership or operating agreement (also known as a company agreement) outlining what rights and responsibilities each partner will have. What capital or other contributions are being made by each person? Will you share profits and losses? How will business decisions be made? What happens if one or more of the business partners wants to sell their portion of the company? The best thing to do is sit down with the people you are going into business with and talk it over. Nail down your ideal working relationship and how you will exit the relationship, and then work with an attorney to draft the agreement. A partnership agreement or operating agreement is imperative to protecting you and the company.
3. Conduct preliminary branding search: Before deciding on a name for your new business or building an app, conduct the proper research to ensure your proposed name is available for use and possible registration. You can conduct some preliminary internet research on your own to make sure it is not in use and search the United States Patent and Trademark Office website to check if there are any trademark applications or registrations already covering the same or similar name and the same or similar products and services. If you consult a trademark attorney, they can help you do a thorough trademark search to determine whether your proposed name is available for use and registration. If you fail to do the research now, a third-party using the same or similar name may object to your use of the name and you might be forced to rebrand later. You should make sure your proposed name is available before you spend a significant amount of time in branding and/or developing marketing materials for your new business or new app.
4. Prepare strong employment and independent contractor agreements: If you will be working with third-parties or hiring employees to develop the code or design for your app, create social media campaigns, manage your marketing, or any other types of business activities, you need strong contracts in place with all independent contractors and employees. These agreements should include clauses covering confidentiality and intellectual property ownership, and where applicable, possible non-solicitation language. You want to make sure that anything produced or developed by someone you work with becomes the property of the company and isn’t accidentally owned by that third-party creator.
5. Use Non-Disclosure Agreements: Many potential investors and advisors in the tech world may push back on signing an NDA for you, but if they request confidential information, you should make sure that an NDA or advisor agreement is in place to protect that information. You also should have consultants and any potential business partners you work with on bringing your idea to life can and sign an NDA. Having one on hand to use in the right scenario is beneficial.
6. Create a Privacy Policy and Terms of Use: Privacy must be a consideration for all tech companies. A privacy policy is required by law for any business that has a website. Terms of use/service are not necessarily required, but very important, especially if you provide services online or allow customers to purchase products online. Both documents will outline the relationship between your business and the users or customers. Many states and foreign countries have passed new laws governing privacy and security requirements for online businesses so it is important that you consult an attorney to determine whether these laws will have an impact on you and your business. These laws may limit or affect what personally identifiable information you can and cannot take, store, sell, and use from your customer base.
7. Apply for Intellectual Property Protection: You may want to protect your new app or business by applying for copyright, trademark, and patent protection. While many new businesses have limited financial resources, it is vital that you protect your intellectual property early on. If you are developing a new app, you may want to file a copyright application to protect the source code. You may also want to trademark your brand name and logos to protect your brand. You may also want to file a patent application if your new app or business involves an invention. Consulting an attorney may help you prioritize which intellectual property protections are the most important for your business and which types you should invest in first.
This list is not everything you need to think about when getting your tech business started, but it does provide some very important considerations to make before you start investing significant time and resources on turning that genius idea into a reality. If you have an idea and are interested in working with me, email me at sstraughan@creedon.com.
Please note that this article is for informational purposes only and is not meant to be legal advice. Please consult an attorney to determine which of the topics above should be considered for your app or business.