Top five legal tips for tech startups

HCR Law is passionate about supporting tech startups to become growth businesses. With extensive experience advising businesses in the market, we share five key areas for tech startups to address from the beginning of their journey.

1. Agree how you’ll work together: Founders often start out as trusted friends or colleagues with a shared vision, but even the strongest relationships can be tested by the pressures of building a business.

It’s important to formalise how you’ll work together by signing a shareholders’ agreement. This is a legally binding contract that sets out who does what, how decisions are made, how the company will be managed and what happens if someone leaves, clearly defining each founder’s role, responsibilities and ownership upfront. It’s also worth putting employment or consultancy contracts in place. These documents set clear expectations for each team member and protect the business if relationships change.

2. Protect your intellectual property: In a tech business, your idea is often your most valuable asset – and it should formally belong to your company. Investors will want to see that you own what you sell, so make sure to transfer any intellectual property created by founders or consultants to the business.

Always include intellectual property clauses in consultancy agreements, especially with consultants using limited companies. You can also protect sensitive business information, such as trade secrets, with confidentiality clauses in employment contracts and NDAs with third parties where necessary.

Knowing your business’s intellectual property rights helps you protect them, maximises your competitive position and prevents infringement of third parties’ rights.

3. Prepare for investment: Investors will want to see that your business is legally sound and ready to scale, so it’s important to have the right documentation in place before you seek them out.

As part of an early-stage Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS) round, investors will expect to see a shareholders’ agreement, articles of association, employment contracts and intellectual property assignments.

Demonstrating legal diligence builds trust in your team and business model. Having these provisions in place shows you’re serious and helps you move quickly when funding is offered.

4. Understand your responsibilities towards employees: Even the smallest teams need to comply with legal responsibilities to their employees. You’ll need to set up payroll, carry out right to work checks and provide a pension scheme for all members of staff.

Non-compliance can be costly, so it’s worth getting advice early to make sure everything is set up correctly.

You should also invest in good-quality, tailored employment contracts. Online templates may cover the basics like holiday entitlement and working hours, but they won’t protect your intellectual property or confidential information.

5. Choose the right funding partner: Business angel groups can be a key source of funding for early-stage businesses. They tend to invest quickly, often don’t require personal guarantees and bring valuable industry knowledge and contacts.

However, as angel investment is high-risk capital, they may ask for a larger equity stake in your business, meaning you may no longer retain complete control of how you run it.

Securing angel investment can take up to six months from initial contact and you’ll need to be prepared to pitch your business and answer detailed questions about your team, product and market. Most business angels will also expect your company to qualify for SEIS or EIS, which offer tax reliefs to investors making high-risk investments.

HCR Law is exhibiting at Cambridge Tech Week on 16-17 September 2025.

Visit us at the Innovation Alley exhibition to find out how we’re supporting tech start-ups to grow with legal support for businesses using technology to drive positive social or environmental change.

For more information, visit www.hcrlaw.com