Founder Agreement Business

As a new business owner, one of the most important agreements you will need to draft is the founder agreement. This agreement is a legally binding document that outlines the terms and conditions of the relationship between the co-founders of a business. A well-drafted founder agreement can help prevent disputes and misunderstandings between co-founders that could potentially derail the success of the business.

Here are the key elements to include in a founder agreement:

1. Equity Split: One of the most important elements of the founder agreement is the equity split. This section should clearly define the percentage of ownership each co-founder will have in the business. It is important that this is agreed upon at the outset of the business as it can be much harder to adjust later on. A common arrangement is to split the equity evenly between the co-founders.

2. Roles and Responsibilities: The agreement should clearly set out the roles and responsibilities of each co-founder. Having clearly defined roles and responsibilities can help prevent disputes down the line as everyone knows what they are responsible for.

3. Decision-Making Process: The agreement should set out how decisions will be made in the business. There are various decision-making structures that co-founders can choose from such as unanimous, majority, or a veto power. It is important to ensure that any decision-making structure chosen is fair and that all co-founders have a say.

4. Vesting Schedule: A vesting schedule is a timeline that outlines when co-founders will be entitled to receive their equity. This can help prevent situations where a co-founder leaves the business early on, but still owns a significant percentage of the company.

5. Intellectual Property: The agreement should outline each co-founder`s intellectual property rights in relation to the business. This includes any patents, trademarks, copyrights or other proprietary rights.

6. Non-Compete Clause: A non-compete clause can prevent co-founders from competing with the business or taking clients or employees if they leave the company. This can help protect the business from potential harm.

7. Dispute Resolution: Finally, the founder agreement should outline the process for resolving any disputes between co-founders. This can include mediation or arbitration.

In conclusion, a well-drafted founder agreement is a crucial component of any business. As a new business owner, it is important to seek the advice of a legal professional to ensure that your founder agreement covers all the necessary elements and protects your business interests. By having a solid agreement in place, you can help prevent disputes and misunderstandings between co-founders that could potentially derail the success of your business.