Why does IP Assignment Agreement matter?
Without a signed assignment, work product created by a contractor or a pre-incorporation co-founder can legally belong to the person who wrote it, not the company — and this surfaces at the worst possible time, during diligence for a fundraise or acquisition, when a gap in the chain of ownership can stall or kill the deal. It is invisible risk until someone checks, which is precisely when an investor's lawyer will check.
What does IP Assignment Agreement look like in practice?
Suppose a technical co-founder builds the first version of the product for three months before the company incorporates, then a contractor is brought on to build a key integration before anyone thinks to send paperwork. If neither signed an assignment agreement, the company's cap table and product may both rest on IP it does not clearly own. Fixing it after the fact means tracking down the co-founder and contractor to sign retroactively — straightforward if relationships are good, a real obstacle if they are not, which is exactly the wrong time to find out.
What are the common mistakes with IP Assignment Agreement?
- Treating it as an employee-only document and skipping it for contractors, advisors, or a co-founder who has not yet formally joined.
- Signing it after the person has already started building rather than before or at the start of the engagement.
- Assuming a general NDA covers IP ownership — it does not; assignment is a separate, specific grant.
- Losing track of who has and has not signed as the team grows, discovered only when a due-diligence checklist asks for the full set.
Related concepts
- Delaware C-Corp vs. LLCThe Delaware C-corporation is the near-universal entity choice for venture-backed startups because it supports preferred stock, option pools, and the standardized deal structure investors expect; an LLC's pass-through taxation and flexible membership structure make it a poor fit for the same path.
- Employee vs. Independent ContractorThe legal test that determines whether a worker must be treated as a payroll employee, with tax withholding and benefits obligations, or can be engaged as a self-directed independent contractor — and misclassifying someone exposes the company to back taxes and penalties.
- Incorporation Basics and the 83(b) ElectionIncorporating creates the legal entity that issues stock to founders; the 83(b) election is a filing, due within 30 days of receiving restricted stock, that lets founders pay tax on it now at its (typically negligible) current value instead of later as it vests and appreciates.