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How to Sign Founders’ Agreement Template

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A founders agreement is a legal contract essential for co-founders launching a new business. It defines the roles, rights, and responsibilities of each owner and can exist as a standalone document or be part of corporate bylaws, an LLC operating agreement, or a partnership agreement. This agreement is crucial for protecting the interests of all founders and preventing conflicts. In case conflicts arise, the founders agreement offers a framework for resolving disputes by clearly outlining each owner's role in the business. Establishing this agreement helps create a solid foundation for collaboration among co-founders.

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How do you split cofounder equity?

Splitting equity amongst co-founders fairly Rule 1: Aim to split as equally and fairly as possible; Rule 2: Dont take on more than 2 co-founders; Rule 3: Your co-founders should complement your competencies, not copy them; Rule 4: Use vesting. Rule 5: Keep 10% of the company for the most important employees;

What percentage of a company should a CEO have?

As a rule of thumb, a non-founder CEO joining an early-stage startup (that has been running less than a year) would receive 7-10% equity. Other C-level execs would receive 1-5% equity that vests over time (usually 4 years).

How much equity should I give my co-founder?

Your co-founder contributes considerable value, is doing half the work and is taking a great risk by co-founding. Though you came up with the idea, considering that your co-founder is doing so much for the business, it is only fair to give her a 50 percent share of the equity pie.

How do you write a founders agreement?

What Should be Included in a Founders Agreement? Names of Founders and Company. This one is pretty non-negotiable. Ownership Structure. The Project. Initial Capital and Additional Contributions. Expenses and Budget. Taxes. Roles and Responsibilities. Management and Legal Decision-Making, Operating, and Approval Rights.

Is a founders agreement legally binding?

Allocate sufficient time to think through each aspect of the agreement, from formation to termination and everything in between. Dont get personal; keep it professional. A founders agreement is a legally binding contract. Consult with a lawyer to review your agreement.

What percentage should you give a cofounder?

In general, independent startup advisors account for a maximum of 5% of shares. Investors own 20-30% of startup shares, while the founders and co-founders should have more than 60%. You can also leave around 5% of available shares but allocate 10% to employees.

Should cofounders split equity equally?

So, if you split equity unequally now because it seems fair, it might seem unfair later on. This is why founders and startup experts generally agree that an equal split is the best option with good, equally committed co-founders, the work tends to even out over the long run.

What are the key considerations in founders agreement?

The Agreement sets forth the ownership, rights, responsibilities, dispute resolution and other terms to be executed between the founders and the company. One of the most important terms of the Agreement is determining the proportion of equity ownership of each of the co-founders of the company.

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