Learn the Basics

What these are

When founders use these

Rarely for venture-backed startups. Sole proprietorships and general partnerships offer no liability protection and are not suitable for fundraising. LPs and LLPs are primarily used for professional services firms or investment vehicles. JVs may be used for specific collaborations or pilots with strategic partners.

Pros & cons for startups

What it is

An LLC is a legal entity that separates your personal assets from your business liabilities. It combines the liability protection of a corporation with the tax flexibility of a partnership. LLCs are governed by an Operating Agreement (not a Board of Directors) and don't issue "stock" in the traditional sense; they issue membership interests.

Why early startups often form as LLCs

LLCs are fast and inexpensive to form, have minimal ongoing compliance requirements, and offer pass-through taxation. They're a natural choice for consultancies, bootstrapped businesses, or startups not planning to raise venture capital. Many technical founders also start as an LLC to establish legal protection quickly before deciding on a final structure.

Pros & cons

Formation resources

• Clerky: legal document templates for startups
• File directly with your state's Secretary of State website (most states support online filing)

What each type is

Why founders choose C-Corps for fundraising

Most venture capital funds are legally restricted from investing in LLCs or S-Corps. A Delaware C-Corporation is the standard for VC-backed startups. It also enables:

• Issuing preferred stock (what VCs receive in exchange for their investment)
• Employee stock option plans (ISOs and NSOs), critical for attracting talent
• QSBS (Qualified Small Business Stock), a significant capital gains tax exclusion for early investors and founders
• Standard legal documents (SAFEs, convertible notes, Series A term sheets) that investors and lawyers know well

Key differences at a glance

Formation resources

• Stripe Atlas: incorporate a Delaware C-Corp online (~$500)
• Clerky: startup incorporation with standard legal docs included
• YC Library: guides on incorporation and early fundraising

What they are

A copyright is the automatic legal right you get when you create an original work: code, written content, designs, marketing copy, or other creative expression. You own it the moment you create it; no registration required. Copyright protects your expression of an idea, not the idea itself.

When you need to think about them

Copyrights matter any time your startup produces original works: software, website content, product designs, or documentation. They also matter when you hire: work created by employees within the scope of their job is generally owned by the company ("work for hire"), but work by independent contractors requires a written IP assignment to transfer ownership.

How to obtain / protect them

You automatically have copyright from the moment of creation, but federal registration strengthens your position: it's required before you can sue for infringement in the U.S., and it lets you claim statutory damages without proving actual monetary loss.

• Register through the U.S. Copyright Office (typically $35–$65 per registration)
• Have all employees sign IP assignment agreements so the company owns their work
• Use written contracts with freelancers that include an IP assignment clause

What they are

A trademark is a word, phrase, logo, symbol, or combination that identifies and distinguishes your goods or services from others in the market. Think: your company name, product name, logo, or tagline. Trademark rights protect your brand identity, not a creative work.

When you need them

Think about trademark protection early, before you build significant brand equity. Key moments: when you choose your company or product name, when you design a logo, and when you launch publicly. In the U.S., you gain some trademark rights just by using a mark in commerce, but federal registration gives you national priority and stronger enforcement tools.

How to obtain them

Before filing, do a clearance search to confirm no one is already using a similar mark for similar goods or services. Then file an application with the USPTO.

• Search existing marks: USPTO TESS database
• File your application: USPTO trademark application (filing fees from ~$250–$350 per class)
• Registration typically takes 8–12 months; consider a trademark attorney for complex situations

What IP assignments are

An IP assignment is a written agreement that transfers ownership of intellectual property from one party (e.g., a founder or employee) to another (the company). Without a signed assignment, the individual who created the IP, not the company, may legally own it, even if they were paid to create it.

Ownership vs. Licensing

Ownership means the company holds full title to the IP and can use, modify, sell, or license it as it chooses. This is what you want for your core product and technology.

Licensing means someone else owns the IP but grants you permission to use it under specific conditions. Licenses can be exclusive or non-exclusive, and can be revoked or expire. Investors and acquirers will flag it if your core product depends on licensed, rather than owned, IP.

What founders should know

• Founder PIIAs / CIIAs: Every founder should sign a Proprietary Information and Inventions Assignment agreement at incorporation, assigning all related IP to the company.
• Pre-existing IP: If you built anything before incorporating (initial code, designs, algorithms), that IP must be formally assigned to the company via a separate assignment agreement.
• Employer IP clauses: If any founder or employee has another job, their employer's agreement may claim ownership of inventions developed on the side. Check for conflicts early.
• Employee & contractor agreements: Everyone who creates anything for your company should sign agreements with IP assignment and confidentiality clauses.
• Open source: If your product uses open-source software, understand the license terms. Copyleft licenses like GPL can require you to open-source your own code.

What they are

A patent grants an inventor the exclusive right to make, use, sell, or license an invention for a limited period, typically 20 years from the filing date in the U.S. Patents protect novel, non-obvious, and useful inventions: processes, machines, compositions of matter, or improvements thereof.

When they might apply

Patents may be relevant if your startup has a novel technical invention: a new algorithm, hardware design, manufacturing process, or unique software method that provides meaningful competitive advantage and that competitors could otherwise replicate.