A Startup Founders Agreement is a crucial legal document that outlines the rights, responsibilities, and ownership stakes of each founder involved in a new venture. A well-drafted agreement can prevent future disputes, ensure smooth operations, and protect the interests of all parties.
Key Elements to Include in Your Startup Founders Agreement
Free Founders’ Agreement Template PDF & Word
1. Founder Identification and Roles
Clearly identify each founder by name and contact information.
Define the specific roles and responsibilities of each founder within the company.
Specify the percentage ownership stake each founder will hold in the company.
Consider including vesting schedules to ensure founders remain committed to the company’s long-term success.
2. Intellectual Property Rights
Establish ownership rights over intellectual property created by founders, including patents, trademarks, copyrights, and trade secrets.
Determine how intellectual property will be jointly owned or licensed.
Outline procedures for assigning ownership rights to the company.
3. Equity and Ownership
Clearly define the initial equity distribution among founders.
Establish a process for issuing additional equity, such as stock options or preferred stock.
Consider including provisions for buy-sell agreements to facilitate the exit of founders.
4. Capital Contributions
Specify the initial capital contributions required from each founder.
Outline the process for future capital contributions and equity adjustments.
Address valuation methodologies and dilution protection for existing shareholders.
5. Decision-Making and Governance
Establish a decision-making process, such as majority voting or unanimous consent.
Define the roles and responsibilities of key decision-makers, such as the CEO and board of directors.
Outline procedures for resolving disputes and conflicts among founders.
6. Exit Strategy
Discuss potential exit strategies, such as mergers, acquisitions, or initial public offerings (IPOs).
Establish guidelines for valuing the company and distributing proceeds.
Consider including provisions for tag-along and drag-along rights.
Implement confidentiality obligations to protect sensitive company information.
Consider including non-compete clauses to prevent founders from competing with the company.
Define the scope and duration of confidentiality and non-compete obligations.
8. Dispute Resolution
Specify the preferred method for resolving disputes, such as mediation or arbitration.
Outline the governing law and jurisdiction for any legal proceedings.
9. Termination and Dissolution
Define the circumstances under which a founder may be removed from the company.
Establish procedures for dissolving the company and distributing assets.
10. Miscellaneous Provisions
Include boilerplate provisions such as entire agreement, severability, and notice.
Consider adding provisions for indemnification and insurance.
Design Considerations for a Professional Agreement
Clear and Concise Language: Use plain language and avoid legal jargon to ensure clarity and understanding.
Consistent Formatting: Maintain consistent formatting throughout the document, including font, font size, and line spacing.
Professional Layout: Use a clean and professional layout, with headings and subheadings to organize the content.
Legal Review: Consult with an attorney to ensure the agreement is legally sound and tailored to your specific needs.
By carefully considering these elements and seeking legal advice, you can create a comprehensive and professional Startup Founders Agreement that protects your interests and sets a strong foundation for your venture.
