Starting a blockchain software business? Below is a checklist of some of the legal & business issues common to this emerging industry.
1. Code☐ Build off an existing platform like Ethereum or create a new blockchain platform?
☐ Generally don't need permission to build but banks are keen on "permissioned" blockchains and integration partners may require agreements
☐ Open source or closed source? Generally "blockchain" = open source but there are other models (e.g. R3).
☐ A combination of open source and closed source? Which parts?
☐ How will the blockchain be used? How will the software be used? Which open source license is most appropriate?
☐ Who will own contributions to the code? Will there be a "contributor license agreement"? Assignment?
☐ What about supporting assets like images, videos, etc.? Written agreements will help avoid conflicts later and ensure that a departing individual doesn't take their work with them.
2. Tokens☐ Will the software use a new token? What will it do?
☐ Will the tokens exist within an existing software system like Ethereum? Or a new platform?
☐ Will the tokens be sold in advance of the product launch? (an "Initial Coin Offering" or "crowdsale")
☐ What are the implications of selling the tokens? Is it a sale of "securities"?
☐ Are there securities law issues or question marks? How will the answers be discovered? At what cost?
☐ In what countries will the tokens be sold?
☐ Specific issues in certain places? Will some places be off limits due to legal issues?
☐ What are the tax implications of selling the tokens? Will all the money be spent on development or will there be a profit component to the sale?
☐ Who will speak for the business? How will miscommunication be avoided?
3. Corporate Structure☐ Will there be a company? Where will it be incorporated?
☐ Generally companies are incorporated where the founders live
☐ Will the company structure allow for distribution of equity? Is that important or will the reward be tokens?
☐ How will equity be given out? To whom? Vesting terms?
4. People☐ Who will build the product? Who will run the business?
☐ Written agreements help avoid disputes. Are confidentiality agreements (NDAs) necessary or desirable?
☐ Titles make responsibilities clear both within an organization and outside. Who will be the leaders?
☐ Will there be a vetting process for contributors? e.g. Mozilla
☐ What incentives will be necessary to bring the right people on board? Equity? Tokens? Titles?
☐ Will contributors be employees or contractors? Will they work in an office or remotely?
☐ What are the tax differences for employee vs. contractor? What systems are needed to ensure appropriate taxes are paid (to avoid penalties)?
5. Revenue Model☐ How will continued development of the product be sustained after the initial money runs out? Is money required?
☐ How will the business make money? How could it make money?
6. Funding☐ Can the business be self-funded? This is the easiest and fastest option usually but requires significant personal resources.
☐ Should it be? Is it better to have others involved from the beginning with "skin in the game"?
☐ Can the initial founders fund the business?
☐ Are the initial founders a complete team? Are there skills missing?
☐ Will sweat equity by founders get the business to where it needs to be?
☐ Can the initial founders lend the business the money necessary to start up? Written agreements can help avoid conflict later on.
☐ Will there be a product pre-sale?
☐ Will it be a traditional product pre-sale like Kickstarter?
☐ Will it be an "initial coin offering" (ICO)? Modelled on the Ethereum sale?
☐ When will the product be delivered?
☐ Is securities advice necessary?
☐ What sort of documentation will purchasers be given?
☐ Will there be external investors?
☐ Angel investors? Venture capital?
☐ Will the nature of the external investment have any bearing on the product development?
☐ What sort of legal advice/paperwork will be necessary for the investors?
7. Beta-Testing☐ How buggy is/will the product be when it's first tested?
☐ What's the worst that could happen? e.g. The DAO...
☐ What sort of disclaimers are necessary? What are the consequences of improper disclaimers?
8. Customers☐ Who will the customers be?
☐ Are more complicated agreements necessary for business users?
☐ What personal information will the business have?
☐ Is a policy necessary?
☐ How will personal information be secured? Who will have access to it?
9. Trademarks☐ Are trademarks necessary to protect the business name? Who will be allowed to use the name?
☐ How will they be enforced?
☐ How much will it cost to file trademarks in key countries/regions?
10. Patents☐ Is anything new being created? Is it patentable? Do other people have patents on how it will be done?
☐ Do the funders (if any) want patents?
☐ Are patents desirable?
☐ Should the patents be licensed to the community? e.g. DPL.
11. Accounting☐ How will money be tracked within the organization? Cryptocurrencies (e.g. Bitcoin) use multiple addresses rather than a single business bank account and may require different processes than a traditional business.
☐ How will expenses and income be tracked? Who will be responsible?
☐ Will accountants from several countries be required?
☐ Will tax advice on movement of funds between countries be required? (transfer pricing)
Note: the list above is not exhaustive.
There may be important legal consequences to actions in this space. Speak to a lawyer about your specific situation or the business you're considering starting.