1. Who Can Sign and Bind the Startup?
A founder's title does not necessarily establish signing authority. The parties should identify the legal entity, its management structure, and required approvals.
Signing Authority under New York LLC Law
Under New York LLC Law §412, members of a member-managed LLC generally may bind the company in ordinary business transactions, subject to exceptions. In a manager-managed LLC, membership alone does not confer that authority. Transactions outside the ordinary course generally require actual authorization. Review the operating agreement and internal approvals alongside the business agreement.
H3: Foreign Llcs and Personal Guarantees
For LLCs formed outside New York, LLC Law §801 generally applies the formation jurisdiction's law to organization, internal affairs, and member or manager liability. This differs from the law governing the commercial contract. A personal guarantee creates obligations separate from company liabilities. The signature block should clarify whether the founder signs for the entity, personally, or both.
2. Which Licenses or Approvals Are Needed before Performance?
Company formation does not authorize every business activity. Required approvals depend on the industry, services, and operating location.
Business Licensing and Contract Performance
NYC's Step-by-Step business tool identifies potentially applicable city, state, and federal permits. The Department of Consumer and Worker Protection (DCWP) licenses selected businesses, while other agencies regulate specific industries. Businesses requiring DCWP licensing can apply through its online system. Some activities require approval before operations begin, even when a customer contract has been signed.
Consumer Protection and Advertising Obligations
Customer-facing startups must review advertising and sales restrictions. New York General Business Law §349 prohibits unfair, deceptive, or abusive practices, while §350 separately prohibits false advertising. The 2026 amendment expanded the Attorney General's enforcement authority under §349. However, the private right of action under §349(h) remains directed at injuries caused by deceptive practices. Disclaimers do not automatically excuse unlawful conduct. Advertising claims and refund terms should reflect actual business practices.
3. Which Contract Terms Create the Greatest Exposure?
Payment, performance, liability, and intellectual property provisions determine the consequences of failed transactions. These terms deserve review before performance begins.
Payment, Performance, and Liability Terms
Agreements should define deliverables, payment milestones, acceptance criteria, and procedures for correcting deficient work. Unclear approval standards may cause payment disputes. For goods, supply agreements should address quantities, inspection, and delivery risks. New York UCC Article 2 governs goods transactions, with specific rules for mixed goods and services contracts. Liability caps and indemnification clauses allocate risks. Their enforceability depends on the wording, applicable law, and statutory restrictions.
Intellectual Property and Contractor Deliverables
Paying an independent developer does not automatically transfer copyright. Under 17 U.S.C. §204(a), transfers generally require a signed writing unless ownership passes by operation of law. Work-made-for-hire status requires statutory conditions. Specially commissioned works generally need an express signed agreement and must fall within a qualifying category. Contracts should distinguish new work from existing software, confidential materials, and third-party licenses. Clear intellectual property provisions define rights after termination.
4. What Dispute Terms Should a Startup Review before Signing?
Notice, cure, termination, and dispute-resolution clauses determine how parties address disagreements. These provisions should reflect the company's ability to comply.
Notice, Cure, and Termination Requirements
Termination for convenience differs from termination for breach. Contracts should specify grounds for termination, notices, cure periods, and outstanding payments. Check whether notices must reach a particular address or representative. Missing a notice requirement may affect remedies even when the other party breaches.
Arbitration, Forum Selection, and Governing Law
Arbitration may require private dispute resolution rather than litigation. Forum-selection clauses specify where disputes proceed, while governing-law clauses identify applicable substantive law, subject to enforceability rules. These clauses serve different purposes. Choosing New York contract law does not automatically change an out-of-state LLC's internal governance law.
5. Frequently Asked Questions
Can an Unsigned Business Contract Be Enforceable in New York?
Yes, depending on the transaction. UCC §2-201 generally requires a sufficient signed record for goods priced at $500 or more, subject to exceptions involving merchant confirmations, specially manufactured goods, performance, or admissions. General Obligations Law §5-701 separately requires signed writings for certain agreements, including specified guarantees and agreements that cannot be performed within one year.
Can a Startup Sign a Customer Contract Before Obtaining a Business License?
Sometimes. Contract formation and authorization to perform regulated activities are separate questions. Applicable law may prohibit performance until approval is granted. Licensing violations can affect enforceability or create regulatory consequences. Contracts should address required approvals and potential failure to obtain them.
6. Reviewing Your First Commercial Agreement
Before signing, gather the contract, operating agreement, corporate approvals, licensing records, and payment and intellectual property terms. A startup lawyer in NYC can review signing authority, regulatory requirements, and potential liabilities before the company commits.
21 Oct, 2026
