Most startups need the same core set of contracts, and having them ready before you need them is what lets you hire, sign customers and bring on advisors in days instead of weeks. Build each one once with counsel, know which terms you will and won’t change, and file every signed copy where you can find it.
Key takeaways
- The ten core documents are a mutual NDA, an advisor agreement, a contractor agreement, an offer letter, a CIIAA, a restricted stock purchase agreement, a stock option grant, a customer agreement, terms of service with a privacy policy, and a separation agreement.
- Everyone who creates IP for the company, including founders and contractors, should sign an IP assignment.
- Don’t put non-competes in offer letters or advisor agreements. Use confidentiality and, where needed, a narrow non-solicit.
- Templates you grab online rarely fit. A custom version built once pays for itself quickly.
Which contracts do I need, and when?
| Contract | When you typically need it | Learn more |
| Mutual NDA | First serious partnership or vendor conversation | NDA |
| Advisor agreement | First advisor | Advisor agreement |
| Independent contractor agreement | First freelancer or agency | Contractor agreement |
| Offer letter | First employee | Employment agreement |
| CIIAA | Formation (founders) and every hire | CIIAA |
| Restricted stock purchase agreement | Formation (founders), then first hires | RSPA |
| Stock option grant | Hires after your first 409A valuation | Stock options |
| Customer agreement (MSA or SaaS terms) | First paying customer | Customer contracts |
| Terms of service and privacy policy | Before you launch a product or collect user data | Terms and privacy |
| Separation agreement | First departure | Separation |
1. Mutual NDA
An NDA lets two companies share confidential information while they explore working together. A mutual version, where both sides are protected, is easier to get signed and works for partners, vendors and potential acquirers. The terms that matter are the definition of confidential information, how long the obligation lasts and what the recipient can do with it.
The common mistake is asking for one in the wrong place. Most venture investors won’t sign NDAs to hear a pitch, and asking signals inexperience. Save NDAs for conversations where you will share real technical or business detail.
2. Advisor agreement
An advisor agreement sets out what the advisor will do, how they are paid, how long the relationship lasts and who owns what they contribute. Advisors are usually paid in equity. At Westaway, advisors typically receive restricted stock early on and options once the company has a 409A valuation. See Startup Advisor Compensation.
Every advisor agreement needs confidentiality and an assignment of any IP the advisor creates for the company. Don’t add a non-compete. Advisors usually help several companies, a non-compete is rarely enforceable, and many states limit or ban them. A narrow non-solicit of employees is the most you should ask for.
3. Independent contractor agreement
A contractor agreement covers the scope of work, payment, term and termination, and, most importantly, IP. Under copyright law, most software written by a contractor is owned by the contractor unless there is a written assignment, so the agreement must include a present assignment of everything they create for you. Without it, you may not own your own product.
The other risk is classification. Calling someone a contractor doesn’t make them one. If you control how, when and where they work, they may legally be an employee. See Startup Contractor Agreement and Independent Contractor vs Employee.
4. Offer letter
An offer letter confirms the role, start date, salary, benefits and any equity, and states that employment is at will. Equity should be stated as an exact number of shares, subject to board approval, not a percentage. See Why Use Exact Share Numbers.
Two things we leave out: probation periods, which undercut at-will employment and add nothing, and non-competes, which are void or restricted in many states and unnecessary when the employee signs a CIIAA. Check whether the role qualifies as exempt from overtime under federal and state rules before you set the salary. See Startup Employment Contract Guide and Exempt vs Nonexempt Employee.
5. CIIAA
A Confidential Information and Invention Assignment Agreement is how the company protects its secrets and owns what its people create. Every founder and employee should sign one, and contractors should sign one or have the same terms in their contractor agreement. Investors will check for a signed CIIAA from everyone who touched the product.
The common mistakes are signing late and using weak language. Sign on day one, and make sure the agreement says the person “hereby assigns” inventions, which transfers them automatically, rather than “agrees to assign.” See CIIAA and Who Owns Startup IP?.
6. Restricted stock purchase agreement
The RSPA is how founders, and early hires before the company’s first 409A valuation, buy their shares. At Westaway, founders buy restricted stock at fair market value (par value at formation) with four-year vesting and a one-year cliff, and file an 83(b) election.
The agreement sets the vesting schedule and the company’s right to repurchase unvested shares if the holder leaves. The mistake that can’t be fixed is a missed 83(b) election. It must be filed with the IRS within 30 days from the date the shares are issued, with no extensions. See RSPA and 83(b) Election.
7. Stock option grant
Once the company has a 409A valuation, most new hires receive stock options under the company’s equity incentive plan: ISOs for US employees and NSOs for everyone else. The grant agreement sets the number of shares, the exercise price, the vesting schedule and the post-termination exercise period.
The board must approve each grant, and the exercise price must be at least the fair market value on the grant date. The common mistakes are treating the offer letter as the grant, granting with no board approval, and using a 409A that has expired. See Employee Stock Option Plan and 409A Valuation.
8. Customer agreement
If you sell services, a master services agreement sets the general terms once, and each project gets a short statement of work. If you sell software, you’ll use SaaS terms or an order form with terms attached. Either way, the terms that matter most are the limitation of liability, ownership of IP and customer data, payment terms and termination.
Know who can sign. Contracts should be signed by an officer with authority under the bylaws or a board resolution. E-signatures are valid, and documents should be dated when they are actually signed. See How Do I Negotiate Customer Contracts? and Service Level Agreement.
9. Terms of service and privacy policy
If people use your website or app, you need terms of service that limit your liability and set the rules of use, and a privacy policy that accurately describes what data you collect and how you use it. A privacy policy isn’t optional. California requires one for any site that collects personal information from its residents, and a growing number of states have comprehensive privacy laws.
The most common mistake is copying another company’s terms. Their policy describes their data practices, not yours, and an inaccurate privacy policy is itself a legal risk. See How to Draft Terms of Service and Does My Startup Need a Privacy Policy?.
10. Separation agreement
When an employee leaves, a separation agreement gives them severance in exchange for a release of claims against the company. It also confirms final pay, what happens to their equity, return of company property and their continuing confidentiality obligations. At early-stage companies, 2 to 4 weeks of base salary is typical severance. Executives more often receive 3 to 6 months.
The common mistakes are paying severance without getting a signed release, and using a release that doesn’t meet federal rules for employees 40 and older, who must get time to consider and revoke. See What Do I Need to Do When an Employee Is Fired? and What Do I Need to Do When an Employee Quits?.
What about contracts other companies ask me to sign?
These ten are documents you send. You’ll also be asked to sign other companies’ paper: vendor and SaaS agreements, partnership, reseller and referral agreements, and customer contracts on the customer’s form. Read the liability, indemnity, IP and auto-renewal terms before you sign, because those are where a startup takes on the most risk. For anything significant, have counsel review it. See Contract Review and How Do I Draft a Strong Contract?.
Board consents aren’t contracts, but you’ll need them too, to approve equity grants, officers and major contracts. See Startup Board Consent and What Agreements Should Startups Have With Their Employees?. If you’d like help building your core contracts, contact us.
