You’ve built something exciting. You’re talking to investors. You might even have a term sheet on the horizon. But before any serious investor writes a check, they’ll do one thing first: due diligence.
And if your legal house isn’t in order, that can be a dealbreaker, or at best, a delay.
Here’s a practical legal hygiene checklist to help ensure your startup is investor-ready when it’s time to raise a seed or Series A round.
1. Corporate Structure and Formation Documents
First things first: are you legally structured the right way?
- Are you a Delaware C-Corp? That’s the gold standard for venture-backed startups. If you’re still an LLC or incorporated in another state, you’ll likely need to convert.
- Do you have your Certificate of Incorporation?
- Have you adopted bylaws and executed initial board consents?
- Have officers and directors been properly appointed?
Missing or incomplete or unsigned formation documents are red flags for investors.
2. Cap Table Clarity
Nothing stalls a deal faster than a messy or inaccurate cap table.
- Do you have written stock purchase agreements for all founders?
- Are there vesting schedules and clear ownership percentages?
- Have you issued stock options properly, with board approval and 409A valuations if applicable?
Even handshake equity deals need to be formalized before you raise. Unclear equity ownership will delay diligence, or cause investors to walk away.
3. 83(b) Elections
If founders or employees have restricted stock with vesting, the 83(b) election must be filed within 30 days of the grant.
- Did everyone file their 83(b)s on time?
- Can you produce proof of filing?
Failure here could create tax headaches and confusion about when equity is earned—issues no investor wants to inherit.
4. Intellectual Property (IP) Ownership
Investors want to know your startup actually owns what it’s building.
- Have all founders, employees, and contractors signed IP assignment agreements?
- Is your codebase clean of open-source license issues or third-party IP risks?
If someone who worked on your product walks away and still owns part of the IP, that’s a major liability.
5. Contracts and Liabilities
- Do you have customer or vendor agreements that are clear and enforceable?
- Are there any outstanding disputes or legal threats?
- Is your data privacy policy aligned with how you actually handle user data?
Investors will want to know you’re not exposed to unknown risks that could blow up later.
6. Board & Governance
Your board of directors will play a major role as you grow and raise additional capital.
- Do you have a functioning board in place?
- Are meetings and resolutions properly documented?
- Are stockholder consents and major decisions tracked and signed?
Investors want to see that you run your company like a real business, not just a group chat with equity.
7. Clean Financial and Legal Records
Organized documentation is key.
- Is your data room ready?
- Can you quickly produce key corporate, tax, and financial documents?
- Are you working with legal counsel who can guide you through diligence?
If your docs are scattered across inboxes and Google Drives, now’s the time to organize.
Startups don’t need to be perfect, but they do need to be clean enough to pass an investor’s sniff test. Taking the time to get your legal foundation in order now can make the difference between a smooth raise and a stalled deal.
At Kinetic Law, we specialize in getting early-stage companies investor-ready. From cleaning up cap tables to preparing diligence-friendly corporate records, we help founders navigate the legal side of raising capital with confidence.
Thinking about raising? Let’s talk.