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Terms to Consider in the Founders Agreement

A founders agreement is simply a contract that covers the relationship between founders of a business. Separate from any operating agreements tied to the business (e.g. Corporate Bylaws or Operating Agreements), a founders agreement should think present and future of the business, its founders, and potential growth. And while this agreement does not have to be filed with any state department or agency, it is an important to come up with a Founders Agreement as you build the business from the ground up.

The agreement itself does not have to be complicated but it should cover some basic terms, including, but not limited to:

  • What is the goal and vision of the business?

  • What are the roles and responsibilities?

  • How will the equity be split?

  • Will the percentage of ownership for each founder be subject to vesting?

  • If one of the founders leaves, does the company or remaining founders have the right to buy back the departing founders shares? And if so, at what price and what terms?

  • Will there be salaries to start? How are those salaries determined?

  • What time commitment is expected of each of the founders?

  • How will key decisions be made? How will day-to-day decisions of the business be made? (E.g. majority vote, unanimous)

  • How will day-to-day operations be run? Are there decisions on management roles? Who will determine what management to bring on?

  • What assets or cash will each founder contribute or invest into the business? Are the cash, assets, and sweat equity outlined in any of the business startup documents?

  • How will the sale of the business be decided?

  • What if you need to remove a founder from the business? How is that determined and by what method?

And while the terms above are only some of the terms to consider when creating your agreement, the goal should be simple: create a robust (but not restrictive) agreement that each founder can confidently stand/operate by so you can set the business up for success.

Always feel free to consult your attorney(s) to discuss the risks, liabilities and benefits of your Founders Agreement.


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