The Legal Checklist for Startups: From Registration to First Contract

Launching a startup is exhilarating but behind every great idea lies a stack of legal tasks you can’t afford to ignore. Miss one, and you may face compliance headaches, disputes, or reputational risk. To help founders stay grounded, here’s a practical legal checklist tailored for South African startups (and broadly applicable elsewhere), walking you through from “What entity am I?” to “How do I draft that first customer contract?”

1. Choose and Register the Right Business Structure

Why this matters: Your choice determines your liability exposure, tax obligations, governance burdens, and ability to scale or attract investment.

• Decide among options: sole proprietor, partnership, close corporation (if still applicable), or Private Company (Pty) Ltd. Many high‑growth startups opt for Pty Ltd for limited liability and credibility. (See CIPC registration procedures)

• Reserve and register your business name with CIPC.

• Draft and file the Memorandum of Incorporation (MOI) (or articles of association) consistent with your governance expectations.

• Document the founding share structure, founder share allocations, and vesting mechanisms (if applicable).

• Create a Founders’ Agreement / Shareholders’ Agreement to handle rights, exit, decision‑making, share transfers, deadlock resolution, etc.

2. Register for Taxes, Banking & Compliance

• Register with SARS for:

  • Income tax (company / personal)

  • VAT (if you expect revenue above the threshold)

  • PAYE / UIF / SDL if you have employees

• Open a dedicated business bank account (separate from personal finances).

• Ensure you understand industry‑specific licenses or regulatory requirements (e.g. financial services, health, import/export, etc.).

• Keep up with annual returns and compliance to avoid penalties or deregistration (as CIPC and SARS require).

3. Protect Your Intellectual Property (IP)

Your startup is more than bricks and mortar — its value often lies in ideas, brand, software, designs and know-how.

• Identify your key IP (trademarks, domain names, logos, patents, trade secrets, copyrights).

• File trademark applications with the CIPC to protect brand identity.

• If you create software, document ownership and licensing rights (especially with contractors).

• Use non-disclosure / confidentiality agreements (NDAs) before disclosing sensitive or proprietary information to third parties.

• Institute internal policies to preserve secrecy (e.g. marking “confidential,” restricting access, exit protocols).

4. Build Your Contractual Framework

The moment you begin operating — engaging suppliers, hiring, delivering to customers — you’ll need sound contracts. Poor contracts are among the most common legal risks for startups.

Here’s a mini‑checklist for your first contracts:

a) Client / Service Agreements / Sale Contracts

• Clearly define parties, scope, deliverables, milestones, exclusions

• Payment terms: amounts, schedule, methods, late penalties

• Warranties, liability cap, indemnities

• Term, termination conditions, notice periods

• Confidentiality / non‑disclosure clauses

• Intellectual property rights (who owns what post‑deliverable)

• Dispute resolution mechanism (mediation, arbitration, courts)

• Governing law and jurisdiction

• Force majeure and “what if the world changes?” clauses

b) Employment / Contractor Agreements

• For employees: align with labor law (Basic Conditions of Employment Act, etc.)

• For independent contractors / freelancers: clarify nature of relationship, deliverables, payment, termination

• Option grants, vesting (if applicable)

• Non‑compete, non‑solicitation (as legally permissible)

c) Supplier / Vendor Contracts

• Service level agreements, quality standards, delivery obligations

• Payment terms, penalties

• Warranty, maintenance, aftersales clauses

• Indemnities for defects or third‑party claims

d) NDAs / Confidentiality Agreements

• Use when disclosing sensitive information (e.g. pitch to investors, tech partners)

• Make clear what qualifies as “Confidential Information,” duration, permitted disclosures

As you draft, it helps to use a contract‑drafting checklist (e.g. the “Ultimate Contract Drafting Checklist”) to ensure you don’t omit critical clauses.

5. Privacy, Data Protection & Compliance

• Since you’ll likely collect personal information (customers, employees, users), ensure compliance with POPIA (Protection of Personal Information Act) in South Africa. The Purposeful Entrepreneur

• Draft and publish a Privacy Policy, Data Protection / Security Policy, and procedures for data access, deletion, breach response.

• If your business handles especially sensitive data or cross-border transfers—check whether additional regulatory frameworks apply.

• Implement internal safeguards: encryption, access controls, staff training.

6. Risk, Insurance & Miscellaneous Legal Safeguards

• Get business insurance (liability, cyber, professional indemnity, etc.) depending on your sector.

• Draft internal corporate policies: conflict of interest, whistleblower, code of conduct.

• Address regulatory compliance (anti‑money laundering, export controls, sectoral licenses).

• Prepare corporate records: minutes of board meetings, resolutions, share registers, compliance filings.

7. Due Diligence Readiness & Investor Documents (if applicable)

If you plan to raise capital or bring in investors, you’ll want your legal house in order:

• Create and maintain a data room with key documents (MOI, shareholder agreements, IP filings, contracts, financials).

• Prepare term sheets, investment agreements (SAFEs, convertible notes, equity rounds).

• Ensure all past contracts are clean (no problematic terms that scare investors).

• Run legal audits to identify gaps or risks.

8. Final Pre-Launch Review

Before you sign your first major contract or make your first sales:

• Do a legal audit / checklist review: confirm all registrations, licenses, filings, contracts, policies are in place and current.

• Get a legal opinion or review from a trusted lawyer (especially for your first customer contract).

• Train your team on legal protocols (who can sign contracts, what needs review, escalation of liability).

• Document version control: maintain proper records, backups, and audit trails of contract changes.

How to Work with Startups

• Speak in plain, business‑friendly language—founders may not have legal training.

• Offer modular templates + guidance (so startups can adjust, but you retain control).

• Keep flexible but risk‑aware: early startups may resist heavy liability caps or rigid warranties—help them balance protection with growth.

• Use checklists and drafting tools to standardize quality and reduce errors. IBJ - IJE+1

• Stay proactive: advise not just reactively when they bring you a contract, but help them build their legal scaffolding.