Why Customizing Your Startup Documents to Your Industry is a Mistake

By Incorporation

You need to customize your articles of incorporation and corporate bylaws if you are serious about doing things the right way at your startup company. But be careful how you customize these important startup documents. Don’t fall into a common trap where you think you are customizing your startup documents, but in reality, you are only tinkering with things of nominal importance. To avoid this trap, customize your startup documents according to the relationships within your startup company rather than to your industry.

For example, imagine you and a friend are launching a startup that will develop dashboard widgets for OS X. Both of you plan to put equal time and capital into the startup. While searching for corporate bylaws to help guide your drafting, you come across the following 2 documents:

Bylaws “A”, from a startup company in Mountain View, California that develops similar widgets for Windows Vista with 2 co-founders, one the software developer and the other the pure “money” person, and

Bylaws “B”, from a lemonade stand in Nome, Alaska with 2 co-founders, who put in equal time and capital to run the lemonade operations.

Which set of bylaws will be the better guide for you to draft your dashboard widget startup’s documents? Bylaws “B” by a pretty good margin, even though the Alaskan lemonade entrepreneurs are a long, long way from Silicon Valley.

While the Mountain View startup’s bylaws might at first seem like a great match, the relationship between the 2 co-founders, with one person contributing sweat equity and the other pure capital, makes this company’s bylaws practically irrelevant to your startup company. Sure, you both deal with tech stuff but your respective co-founder relationships drastically differ. On the other hand, the lemonade stand co-founders put in both equal time and money–just like your startup company. Since the lemonade stand co-founders (hopefully) framed their relationship issues in their bylaws, their bylaws will be a much better drafting guide for you. And your startup company will reap the rewards when something goes wrong and your startup’s bylaws are needed to help resolve a dispute between you and your co-founder. They will be on point and address issues likely to come up in your particular situation.

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Bylaws should be drafted according to the relationships between co-founders, shareholders, and officers. They should not be overly concerned with your product or service. Therefore, by customizing your startup documents according to relationships within your startup company rather than your industry, you will end up creating valuable documents for your startup company.


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