What Legal Issues Should Tech Startups Be Aware of in Texas?

When you’re looking to get your tech startup off the ground, working with a business lawyer in San Marcos, TX could make all the difference between a smooth climb to profitability and a rocky, frustrating journey with an unhappy ending.

From a Business Lawyer in San Marcos, TX: Legal Issues Tech Startups Should Be Aware Of

Choosing the Right Structure

This is really your foundational legal decision and will make a big difference to everything else. It’s common for a tech startup to form initially as a Limited Liability Company (LLC) because this allows you a lot of flexibility in taxation and gives your personal assets legal protection from business debts. However, for some companies, a C Corporation structure will be better: this is a good choice for those who want scalability and need to attract venture capital.

There are other models available, as well, but it’s always advisable to have legal counsel to ensure that you are in compliance with the Texas Business Organizations Code, properly registered with the state, and in alignment with any local regulations that might affect you. Your business lawyer will also help you understand the tax and other implications of each structure so you can make the best decision.

Core Contracts

Your core contracts, like your terms of service, are going to influence what you choose in terms of subscription models, data usage policies, and liability limitations. They will also protect you (or not, if not formulated correctly) against disputes over service delivery and intellectual property rights. Your vendor contracts need to be clear in specifying pricing and timelines and contain the confidentiality clauses you need to protect your property. Employment agreements have to properly cover the scope of the job and exactly who has ownership of proprietary ideas and inventions. The risk here, if you mess any of this up, is that you lose control of your core assets.

Licenses, Permits, and Regulations

Texas is a very business-friendly state, relatively speaking, yet there is still a minefield of licensing and regulation to get through if you want to have a successful startup. On the local level, you’ll need general business licenses, and you might need zoning permits. At the state level, everything needs to follow the Texas Business Organizations Code in terms of registration and ongoing compliance filings. If you’re handling any personal data or offering financial services, you’re going to have extra oversight from other regulatory agencies here in Texas and possibly federal as well.

If you have any European clients or users, the European General Data Protection Regulation (GDPR) rules apply. If you’re making software targeted at minors, there’s the Children’s Online Privacy Protection Act (COPPA) to be aware of. For payment processing, you need to meet Payment Card Industry Data Security Standard (PCI DSS) rules. Ignoring any of these, at any level, can mean fines at best and the loss of your entire business at worst.

All this is just a sample of the legal pitfalls facing a startup, but you can thrive if you tackle these issues proactively. Talk to us at the Artie Pennington Law Offices today in Austin or Kyle, TX for help in San Marcos and throughout the state.

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