GoodFoundersFounder Note 006IP & Assets

Who Owns the IP in a Startup Before Incorporation?

4 min read

Before incorporation, each founder personally owns the IP they create unless they have agreed to assign it to the project. Without an assignment clause, a departing founder can legally walk away with code or designs they made.

Before a company is incorporated, there is no company to own anything. So who owns the product, the code, the designs, the brand?

By default, the person who created it does.

Each founder personally owns the intellectual property they individually create, unless they have signed something that assigns it elsewhere. This is one of the most dangerous and least understood gaps in early startups.

The departing developer problem

Picture a technical cofounder who writes the entire codebase, then leaves after a disagreement. If they never assigned their IP to the project, they may legally still own that code. The company they left behind is now built on intellectual property owned by someone who walked out the door.

If no one assigned the IP to the project, the project may not actually own the thing it was built to sell.

The covenant to assign

The fix is a covenant to assign: a clause in which every founder agrees that all IP they create for the project belongs to the project (and will be formally transferred to the company on incorporation). This keeps the product with the team, not with whichever individual happened to write it.

The same logic applies to assets and access — domains, repositories, cloud accounts, and credentials. These should belong to the project, not sit permanently under one founder's personal account.

Frequently asked questions

Who owns startup code before incorporation?

The founder who wrote it owns it personally, unless they have signed an IP assignment. Without an assignment clause, a departing founder may legally retain ownership of code they created.

What is a covenant to assign?

A covenant to assign is a clause in which founders agree that all intellectual property they create for the project belongs to the project and will be transferred to the company on incorporation.

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Related notes

This is general information, not legal advice. Goodvernance does not provide legal advice. Learn more.