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I launched my first SaaS without a privacy policy, a proper terms of service, or any clue that I was potentially violating securities law just by talking about my startup on Twitter. I got lucky. Most founders do — until they don't.
This is the checklist I wish existed on day one. Not legal advice, but practitioner-level guidance from someone who's been through the paperwork trenches.
1. Business Entity First, Everything Else Second
Before you take a single dollar, form an entity. The default — operating as a sole proprietor — means your personal assets are on the table if someone sues you over a data breach, a billing dispute, or a feature that broke their workflow.
What to actually do:
- LLC (US): Delaware or Wyoming if you want investor-friendliness later, your home state if you're bootstrapped and want simplicity. Wyoming LLCs cost ~$100/year.
- C-Corp: Only if you're planning VC funding. The tax overhead isn't worth it otherwise.
- Non-US founders: Estonia e-Residency (for EU market), UK Ltd, or Singapore Pte. Ltd are common paths with reasonable setup costs.
Get an EIN (US) or equivalent tax ID immediately after formation. You'll need it for Stripe, payment processors, and contractor payments.
2. The Privacy Policy Is Not Optional — And GDPR Has Teeth
If you have a user anywhere in the EU, GDPR applies to you. Full stop. "I'm just a small indie founder" is not a legal defense.
Minimum viable privacy compliance:
- Privacy Policy: Must cover what data you collect, why, how long you keep it, and user rights (access, deletion, portability). Free generators (Termly, iubenda) get you 80% there — read what they generate.
- GDPR lawful basis: For SaaS, this is usually "legitimate interest" or "contract performance." Document your choice internally.
- CCPA (California): If you have California users and make over $25M/year or handle data for 100K+ consumers — you're likely exempt for now, but add a "Do Not Sell" clause to your privacy policy preemptively.
- Data Processing Agreements (DPAs): If you use Stripe, AWS, Mailchimp, or any third-party that touches user data, you need DPAs in place with each of them. Most major vendors have self-serve DPA processes.
- Cookie consent: Any analytics beyond basic server logs requires a consent banner for EU users. Plausible or Fathom Analytics are privacy-first alternatives that skip this requirement entirely.
One red flag I see constantly: founders copy-pasting a privacy policy from a competitor without updating the company name. Don't do this. It's both useless legally and embarrassing.
3. Terms of Service: Where Founders Leave Money (and Safety) on the Table
Your ToS is your primary legal shield. It defines what users can and can't do, limits your liability, and sets expectations before disputes happen.
Critical clauses for indie SaaS:
- Limitation of liability: Cap your liability at the amount the user paid in the last 12 months. Without this, a user whose business lost $500K because your API went down could theoretically come after you for that amount.
- Acceptable use policy (AUP): Explicitly prohibit scraping, abuse, illegal activity, and anything that would get your infrastructure flagged. This is your basis for terminating bad actors.
- Arbitration clause: Requires disputes to go through arbitration rather than class-action lawsuits. Controversial, but standard in SaaS.
- Governing law: Pick one jurisdiction. Don't leave it blank.
- No refunds / refund policy: State it clearly. Vague policies invite chargebacks.
Avoid "last updated" dates that are years old. Courts notice.
4. Securities Law: The Trap Nobody Talks About
This one blindsided me. Securities law isn't just for public companies — it applies the moment you start raising money, even informally.
What triggers securities law:
- Selling equity or revenue-share deals to anyone outside of close friends/family without proper exemptions
- "Investment rounds" via email or social media without filing a Reg D (Form D) with the SEC
- Promising returns to early backers in exchange for money
Safe practices for bootstrappers:
- Founding partnerships: document equity splits in a simple LLC operating agreement, not verbal agreements
- If you take money from anyone beyond co-founders, talk to a startup attorney about Reg CF (crowdfunding) or Reg D exemptions before you post anything publicly
- Revenue-based financing (Clearco, Pipe) is structured to avoid securities classification — a legitimate path
For most bootstrapped founders, this means: don't offer equity to randoms on the internet without paperwork, and definitely don't call it an "investment opportunity."
5. Intellectual Property and Contractor Agreements
You built the product. But who owns it legally?
- Contractor IP assignment: Every freelancer or contractor who touches your code needs to sign an IP assignment agreement. Without it, they may own what they built. Use a simple "work for hire + IP assignment" clause in your contracts.
- Open source licenses: If you use MIT-licensed code, you're generally fine. GPL-licensed code in a commercial product is a serious issue — it may require you to open-source your entire codebase. Audit your dependencies.
- Trademark: Register your name and logo before you scale. A $300 USPTO application prevents a $30,000 rebrand later. Check for existing trademarks before you name anything.
- Non-disclosure agreements (NDAs): Use mutual NDAs for partnership conversations, not one-sided ones. One-sided NDAs signal distrust and often get ignored.
6. Payment, Tax, and Subscription Compliance
The last mile before you take money.
- Sales tax (US): Once you hit economic nexus in a state (typically $100K in sales or 200 transactions), you owe sales tax there. Tools like TaxJar or Avalara automate this. Stripe Tax is the simplest option if you're already on Stripe.
- VAT (EU): If you sell B2C to EU customers, you owe VAT. Stripe handles collection and remittance for B2C digital goods automatically if you configure it. B2B with valid VAT numbers is reverse-charged — cleaner.
- PCI compliance: Never store raw card numbers. Stripe, Paddle, and Lemon Squeezy handle this. Using a Merchant of Record (Paddle, Lemon Squeezy) outsources VAT, sales tax, and chargebacks entirely — worth the 5% fee for early-stage founders.
- Subscription billing disclosures: Be explicit about renewal terms, cancellation policy, and trial-to-paid conversion in your checkout flow. FTC rules require it in the US, and it reduces chargebacks.
The Short Version
Form an entity. Get a real privacy policy and ToS. Understand your data processing obligations before you onboard EU users. Don't raise money without legal structure. Own your IP. Handle tax before it's a problem.
None of this requires a $500/hour attorney for the basics. Most of it is a weekend of focused reading and a few hundred dollars in tools and filings.
I compiled everything into a practical guide: SaaS Legal Shield: Compliance Checklist
This is not legal advice. Consult a licensed attorney for your specific situation, especially around securities, tax, and cross-border compliance.
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