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Startup Compensation Strategy: Best Practices and Pitfalls for Founders
When your startup is strapped for cash and focused on growth, compensation can feel like a puzzle. But how you pay yourself and your team sends a signal - to investors, regulators, and employees. Done wrong, it can cause legal headaches, tax issues, and cultural tension. Here's how to navigate early-stage compensation the smart way.
Legal Essentials: Employment Law Fundamentals for Startup Founders
When you’re building a startup, employment law may not be your first priority - but it should be close to the top of your list. Mistakes in hiring, classifying, compensating, or terminating employees can trigger lawsuits, fines, and reputational damage. Here’s a practical guide to the employment law issues every founder should get right from day one.
Terms of Service: Why Your Startup Needs Them—Now
If you run a website, app, or platform, your Terms of Service (TOS) are more than just boilerplate - they’re your shield. They limit your liability, set ground rules for users, and give you power to enforce your policies. Skip this, and you open the door to chaos.
FAQs
Open allTemplates are a starting point, but your TOS should be customized to your business model, user base, and compliance obligations.
TOS govern how users interact with your platform, while a Privacy Policy explains how you collect, use, and store their personal data.
Yes. Any business with a website, app, or platform should have TOS to set user expectations and limit liability.
Yes - if properly drafted and accepted (usually through clickwrap), TOS create an enforceable contract between you and your users.
Without one, state default laws govern the partnership. These rules may not align with your intentions and can lead to disputes.
Yes. Agreements should be reviewed and updated as the business grows or circumstances change.
Yes. As long as it’s properly drafted and executed, it sets enforceable rules for ownership, profit-sharing, and decision-making.
Yes. Even the strongest relationships benefit from clear rules. A written agreement prevents misunderstandings and protects both parties if circumstances change.
When the relationship involves money, intellectual property, or liability risk, you should transition from an MOU to a formal agreement.
Courts may enforce MOUs if they look like contracts—for example, if they include payment terms or obligations. To avoid confusion, clearly state whether the MOU is binding.
Contracts create enforceable obligations. MOUs generally outline intentions and expectations but stop short of legal enforceability.
Most MOUs are not legally binding, but they can include binding provisions if clearly stated, such as confidentiality or exclusivity.
Overcommitting - such as granting long exclusivity or including too much detail - can lock you into unfavorable terms before negotiations are complete.
Yes, unless you are bound by specific provisions. However, backing out without good reason may damage future relationships.
LOIs outline deal terms upfront, giving both sides confidence before investing in due diligence and full contract drafting.
Most of an LOI is non-binding, but certain provisions like confidentiality and exclusivity are enforceable.
If you handle personal data, a DPA ensures compliance with GDPR, CCPA, and similar laws. Many enterprise clients require it before signing.
Usually the customer, though the provider may retain limited rights to use the data for service delivery, analytics, or improvements.
Yes, especially in B2B deals. SLAs provide uptime guarantees and remedies for service failures, which are critical for enterprise customers.
Traditional licenses transfer a copy of the software, while SaaS Agreements grant access to use the software as a service without ownership.