/legal

name: legal
description: "Use this skill when the user needs to form a business entity, choose between LLC and C-Corp, create Terms of Service, write a Privacy Policy, or handle legal compliance. Covers entity selection, legal documents, contracts, and compliance for solo-founded SaaS."

SaaS Legal & Business Formation

Every SaaS needs three legal documents at launch: Terms of Service, Privacy Policy, and a basic entity structure. Everything else can wait. This skill helps you handle formation, legal docs, and compliance without overspending on attorneys.

> **Disclaimer:** This skill produces informed first drafts based on common SaaS legal patterns. Always have a licensed attorney review before publishing anything that creates binding obligations.

Core Principles

• Legal protection is insurance. You don't need everything on day one, but you need the right things at the right time.
• Solo founders overspend on legal in two ways: paying a lawyer too early for things they don't need yet, or paying a lawyer too late after a problem they could have prevented.
• Every SaaS product needs exactly three legal documents at launch: Terms of Service, Privacy Policy, and a basic entity structure. Everything else can wait.
• Legal language should be readable. If your users can't understand your ToS, it's bad legal writing, not "standard."
• Disclaimers: This skill produces informed first drafts based on common SaaS legal patterns. Always have a licensed attorney review before publishing anything that creates binding obligations.

Business Entity Decision

Solo Founder Entity Comparison

**LLC (Limited Liability Company)**

• Best for: Solo founders who want simplicity and are bootstrapping.
• Liability protection: Yes — separates personal and business assets.
• Tax: Pass-through by default (income on personal return). Can elect S-Corp taxation later.
• Paperwork: Minimal. Operating agreement + annual report (varies by state).
• Cost: $50-500 to form depending on state.
• When to choose: You're bootstrapping, have no plans to raise VC, want simplicity.

**S-Corp (via LLC election)**

• Best for: Solo founders earning $60K+ in profit who want to reduce self-employment tax.
• How: Form an LLC, then file IRS Form 2553 to elect S-Corp taxation.
• Benefit: Pay yourself a "reasonable salary" (subject to payroll tax), take remaining profit as distributions (no self-employment tax).
• When to choose: Once you're consistently profitable at $5K+/month.

**C-Corp (Delaware)**

• Best for: Founders who plan to raise venture capital.
• Required for: Most VC investment, issuing stock options, accelerator programs.
• Tax: Double taxation (corporate tax + personal tax on dividends).
• Cost: $400+ to form in Delaware, plus ~$400/year franchise tax minimum.
• When to choose: Only if you intend to raise institutional money or join an accelerator that requires it.

**Decision flow:**

Planning to raise VC money? → C-Corp (Delaware)
                          ↓ No
Earning $60K+ annual profit? → LLC with S-Corp election
                            ↓ No
Just getting started? → LLC (your home state, or Wyoming/Delaware for privacy)

Formation Checklist

• [ ] Choose entity type
• [ ] File formation documents with state (Articles of Organization for LLC)
• [ ] Get EIN from IRS (free, irs.gov, takes 5 minutes)
• [ ] Draft operating agreement (LLC) or bylaws (Corp)
• [ ] Open business bank account (Mercury, Relay, or local bank)
• [ ] Set up Stripe or payment processor under business entity
• [ ] Set up separate accounting (QuickBooks Self-Employed, Xero, or Wave)
• [ ] Register for state sales tax if required (SaaS taxability varies by state)

Terms of Service

**Tell AI:**

Generate Terms of Service for my SaaS product:
- Product name: [name]
- What it does: [one sentence]
- Pricing model: [free tier / paid plans / both]
- Refund policy: [e.g., 14-day full refund]
- User-generated content: [yes/no — do users upload or create content?]
- Target geography: [US only / US + EU / global]

Use the template structure below. Write in plain English, not legalese.
I'll have an attorney review before publishing.

Structure for SaaS Terms of Service

# Terms of Service

**Last updated: [Date]**

## 1. Agreement to Terms
By accessing or using [Product Name], you agree to these Terms.
If you don't agree, don't use the service.

## 2. Description of Service
[One paragraph: what the product does, that it's provided "as is" as a
cloud service, and that features may change.]

## 3. Accounts
- You must provide accurate information.
- You're responsible for your account security.
- You must be 18+ (or age of majority in your jurisdiction).
- One person per account unless on a team plan.

## 4. Acceptable Use
You agree not to:
- Violate any laws
- Infringe on intellectual property
- Attempt to access other users' data
- Use the service to send spam or malware
- Reverse engineer or scrape the service
- Resell access without permission

## 5. Payment Terms
- Pricing is as displayed on [pricing page URL].
- Subscriptions renew automatically.
- You can cancel anytime; access continues through the paid period.
- Refund policy: [state clearly — e.g., "We offer a full refund within
  14 days of initial purchase. No refunds after 14 days."]
- We may change pricing with 30 days notice.

## 6. Intellectual Property
- We own the service and its original content.
- You own your data. We claim no ownership of content you upload.
- You grant us a limited license to host and display your content
  solely to provide the service.

## 7. Your Data
- You can export your data at any time via [method].
- Upon account deletion, we remove your data within [30/60/90] days.
- See our Privacy Policy for how we handle personal data.

## 8. Service Availability
- We target [99.9%] uptime but don't guarantee it.
- We may perform maintenance with reasonable notice.
- We're not liable for downtime caused by factors outsid