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Understanding Fiduciary Duties: What Founders Owe to Their Startups
When you co-found a startup, you’re not just building a product - you’re taking on serious legal responsibilities. Among the most important are fiduciary duties. These aren’t abstract legal terms. They’re real obligations that shape decisions, disputes, and even lawsuits.
FAQs
Open allCan a waiver and release be mutual?
Yes. In many settlements, both parties agree to release each other from claims, creating a clean break for both sides.
Do employees need extra protections when signing a waiver?
Yes. Federal law requires review and revocation periods in certain situations, especially for employees over 40. This ensures the agreement is fair and enforceable.
Are waiver and release agreements always enforceable?
Not always. Courts require the agreement to be clear, voluntary, and compliant with state-specific laws. Some claims, like wage or workers’ compensation rights, may not be waived.
What is the main purpose of a waiver and release agreement?
It protects your startup by having another party waive their right to bring certain legal claims against you.
What should startups prioritize when reviewing commercial agreements?
Focus on intellectual property rights, payment terms, liability limits, and termination clauses, as these areas create the most potential risk.
Can I use a template for commercial agreements?
Templates are a good starting point, but every deal has unique risks. Having counsel customize terms ensures your startup is protected.
Do startups need different agreements for vendors and customers?
Yes. Vendor agreements protect you when purchasing services, while customer agreements protect you when selling or licensing your own products.
What’s the difference between a sales agreement and a licensing agreement?
A sales agreement transfers ownership of goods or services, while a licensing agreement grants permission to use intellectual property without transferring ownership.
How do MSAs and SOWs protect intellectual property?
These agreements clearly define who owns the work product, whether ownership transfers to the customer, or if your startup retains certain rights. This clarity helps prevent disputes later.
Can an SOW exist without an MSA?
Yes, but it is less efficient. Without an MSA, every project must include all legal terms, which can slow down deals and create inconsistencies.
Do all startups need an MSA?
Not always, but if you plan to work with a customer or vendor on more than one project, an MSA saves significant time and prevents repeated negotiation.
What is the main difference between an MSA and an SOW?
An MSA sets the overall legal terms of the relationship, while an SOW outlines the specifics of an individual project.
Does every investor get an MRL?
No. Only institutional investors that need it for compliance, not angel investors or most venture funds without ERISA LPs.
Is an MRL negotiable?
Generally, no. It’s considered a standard compliance document, though founders can negotiate limits on inspection frequency or reporting burdens.
Does an MRL give investors board seats or control?
No. It typically provides inspection rights, reporting access, and sometimes observer rights—but no formal voting authority.