After Your Great Idea: The Contracts You Need

New ideas are a dime a dozen. What makes an idea unique is the follow through. Out of the handful, dozens, or hundreds of ideas you may have, maybe you’ll pick the one to pursue a bit further.

Maybe it’s a children’s book you wish to write? A new app? A better hammer?

What each of these may have in common is the surge of creative excitement filling your mind with possibilities, as you think about where your idea can take you, and whether it will be made profitable or be recognized. But it is precisely because of this excitement that causes newborn ideas to be quickly mangled, and often, die out. Beware of the following:

(1) Loose Lips Sink Ships. Sharing a good idea with others, will cause it to be shared with others, and others, and so on. Your idea may land on the ears of somebody who may run with it on her own.

(2) Bad Entanglements. As you engage others to develop your idea, you may inadvertently neglect to pay them California’s minimum wage, or, they may claim that they have some percentage ownership of your company. They won’t care about that percentage until your company becomes huge. Though these lawsuits can destroy your company down the road, the seeds are planted at this beginning stage.

Ideally, you should be focusing on developing your idea, and finding the right people to join you. Yet, help yourself by being familiar with these two critical concepts:

(1) Non-Disclosure Agreements (“NDAs”). These agreements protect against your idea being disseminated. It’s essentially a contract between you and whoever you are talking to, where they agree to keep your idea, and documents related to your idea, as confidential. Signing an NDA reminds the person that you take your idea really seriously, and that if the idea pops up somewhere, that the person will be on the short list of people to investigate as leaking the idea. And, if the worst happens and your idea is stolen, you can have legal remedies against the person.

Use NDAs even with people you are considering hiring (i.e. an illustrator for your book; a programmer for your app). Even if you don’t decide to hire them, they are still bound by the terms of the NDA.

(2) General Contracts. If you are hiring a programmer to code your app, or an engineer to design your new screwdriver, sign an agreement that states what his tasks are, his contract price/wage, whether he is an employee/independent contractor, and other critical terms. If you are bringing on somebody (technology expert, marketing professional), start thinking about the kind of business you want to run, and whether instead of wages, you will be paying certain folks with shares of the company.

As your idea develops, you may need protection against injuries, lawsuits, etc. Business structure and insurance can help with these, and will be discussed in later articles.


But at this initial phase, make sure you have your NDAs and general contracts accessible as you talk to people. Speak to an attorney to identify additional issues that you may want to address. With just a few basic steps, your idea will be given its best shot at thriving.

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