Contracts and company law essentials in the United States

Federal, state and the choice of law

Contract, corporate and employment law are mostly state law; trade marks, securities, copyright and patents are federal. Parties may choose the governing law of a commercial contract, and Delaware or New York law is the usual choice for corporate and financing documents. California limits the freedom in one respect: Labor Code section 925 prevents an employer from requiring an employee who primarily lives and works in California to accept another state's law or forum as a condition of employment.

US commercial agreements are long because courts enforce them largely as written between businesses. Indemnities, limitation of liability clauses, warranty disclaimers (which must be conspicuous under the Uniform Commercial Code) and jury waivers all do real work, and templates from Asia or Europe usually need expanding rather than trimming.

Electronic signatures: ESIGN and UETA

The federal ESIGN Act and the Uniform Electronic Transactions Act as enacted in Delaware and California give electronic signatures and records the same effect as paper where the parties have agreed to transact electronically. Exclusions cover wills, codicils and testamentary trusts and most of the UCC other than sales and leases; California adds exclusions for certain consumer notices and specified statutes in Civil Code section 1633.3. Notarised documents follow state notary rules, and remote online notarisation is available in many states. The statute of frauds still requires certain contracts, including sales of goods over USD 500 and contracts that cannot be performed within a year, to be evidenced in writing, which an electronic record satisfies.

Delaware corporations: duties, approvals and stock

Delaware directors owe duties of care and loyalty and are protected by the business judgment rule when informed, disinterested and acting in good faith. The 2025 amendments to the General Corporation Law added safe harbours for controlling-stockholder and interested-director transactions approved by independent directors or disinterested stockholders and narrowed stockholder inspection rights under section 220; check the authority for the current text. Stockholders may act by written consent (section 228) unless the certificate says otherwise, and have appraisal rights in mergers.

Stock is transferred by assignment and recorded on the ledger; there is no transfer tax. Transfer restrictions such as rights of first refusal and co-sale are valid if noted on the certificate or in the stockholders' agreement (section 202). Every issuance and resale must fit a securities exemption: Rule 701 for employee equity, Regulation D for investors. Delaware requires a registered agent and an annual franchise tax report; a company doing business in California also registers there, files a Statement of Information and pays the minimum franchise tax. Section 2115 of the California Corporations Code applies some California rules to foreign corporations with a majority California presence.

Wyoming and Nevada market privacy and low fees for LLCs. They do not change the federal tax position and investors expect Delaware for operating companies. See the GoGoTrust guide on Delaware versus California.

Employment: at will, but not unregulated

Employment is at will in every state except Montana, so probation has no legal meaning and no statutory notice applies to individual terminations; the federal WARN Act and California WARN require 60 days' notice for mass layoffs above thresholds. California requires final pay immediately on dismissal and regulates meal breaks, overtime and classification of contractors closely.

California voids employee non-competes under Business and Professions Code section 16600, and since 1 January 2024 sections 16600.1 and 16600.5 make it unlawful to include or attempt to enforce one, including agreements signed out of state. Delaware enforces reasonable non-competes but the Court of Chancery has refused to blue-pencil overbroad ones. The FTC's 2024 nationwide rule was set aside by a federal court and is not in force. Confidentiality and invention assignment agreements remain effective everywhere, subject to California's section 2870 carve-out for inventions made entirely on the employee's own time.

Equity: plans, 409A and 83(b)

Start-ups adopt an equity incentive plan with board and stockholder approval. Incentive stock options (IRC section 422) give employees favourable tax treatment if statutory conditions are met; non-qualified options and RSUs cover everyone else. The exercise price is set by a 409A valuation, grants rely on Rule 701, and California requires a permit or notice under Corporations Code section 25102(o). A recipient of restricted stock may file an 83(b) election with the IRS within 30 days of grant to be taxed on the grant-date value rather than on vesting; the deadline is absolute. Note that in US usage 'ESOP' means a tax-qualified employee stock ownership plan, a retirement vehicle, not a start-up option plan.

Trade marks: use-based with a federal register

US trade mark rights arise from use in commerce. A federal application may be filed on the basis of use or a bona fide intent to use, but registration issues only after use is shown. Approximately twelve to eighteen months from filing to registration is typical without office actions; the opposition window is 30 days from publication in the Official Gazette, extendable. Registration lasts ten years, renewable, with a Section 8 declaration of continued use due between the fifth and sixth years. Foreign-domiciled applicants must be represented by an attorney licensed in a US state, and descriptions of goods and services are examined strictly. The United States is a Madrid Protocol member.

Checklist

• Incorporate in Delaware, register in the state where you operate, and file in both.
• Never put a non-compete in a California employment agreement.
• Get a 409A valuation before granting options; diarise 83(b) deadlines.
• Check the securities exemption for every issuance.
• File the USPTO application through a US-licensed attorney and plan for use.