Founders Agreement

Creating a Founders Agreement is crucial for establishing clear expectations and guidelines among the founders of a business. Here’s an outline of what a Founders Agreement typically includes:

  1. Introduction and Background: This section outlines the purpose of the agreement, identifies the parties involved (the founders), and provides background information about the business venture.

  2. Business Objectives and Vision: Define the business objectives, mission statement, and long-term vision for the company. This helps align the founders’ goals and aspirations for the business.

  3. Roles and Responsibilities: Clearly outline the roles and responsibilities of each founder within the company. Specify duties, decision-making authority, and areas of expertise for each founder.

  4. Equity Ownership and Vesting: Detail the equity ownership structure of the company, including the percentage of ownership held by each founder. Discuss any initial capital contributions and establish a vesting schedule for equity ownership to incentivize long-term commitment and alignment of interests.

  5. Intellectual Property Ownership: Address ownership and rights to intellectual property created by the founders before and during the course of the business. Specify how intellectual property will be assigned to the company and protected from unauthorized use.

  6. Capital Contributions and Financing: Discuss initial capital contributions by the founders and any future financing arrangements, such as additional equity investment or loans. Determine how financial decisions will be made and how capital will be allocated for business operations.

  7. Decision-Making and Governance: Establish decision-making processes, voting rights, and governance structures within the company. Determine how major decisions will be made, such as hiring key personnel, entering into contracts, or making strategic business decisions.

  8. Management and Operations: Outline the day-to-day management and operational procedures of the business. Address matters such as employment policies, compensation, conflict resolution, and termination of founders’ involvement.

  9. Confidentiality and Non-Compete: Include provisions for confidentiality to protect sensitive business information and trade secrets. Consider adding non-compete and non-solicitation clauses to prevent founders from competing with the business or poaching employees and clients.

  10. Dispute Resolution and Exit Strategies: Specify procedures for resolving disputes among founders, such as mediation or arbitration. Discuss potential exit strategies, including buyout provisions, transfer of ownership, or dissolution of the company.

  11. Term and Termination: Define the duration of the agreement and circumstances under which it can be terminated, such as mutual consent of the founders or material breach of the agreement.

  12. Miscellaneous Provisions: Include any additional provisions deemed necessary or relevant to the specific circumstances of the business venture, such as indemnification, insurance, or applicable law and jurisdiction.