A founders’ agreement is a great way to organize and plan the details of your new business relationship. You will want to get ready in advance to attract new investors and carefully plan your company’s future. Legal mistakes can leave your agreements full of loopholes. Here’s everything you need to know about founders’ agreements.
What is a Founders’ Agreement?
A founder’s agreement is a contract that a partner presents to other startup founders. It establishes the roles, responsibilities, and liabilities of the partners, and it gives them the right to receive compensation from the startup. They also assign IP rights among co-founders. A founder’s agreement is crucial when it comes to demonstrating the seriousness of your startup.
Reasons to Have a Founders’ Agreement
A good founders’ agreement sets the tone for how you interact with each other and manage the business as a team. It’s also a vital step to ensure that everyone is on the same page when it comes to any legal or financial issues associated with the business. The reasons are the following:
- Establishes ownership roles and responsibilities
- Offers guidelines for dispute resolution
- Provides rules surrounding the contract’s termination
- Protects minority shareholders
- Solidifies the seriousness of your business formation
A founders’ agreement is a vital step in forming a well-planned business venture, as it can help avoid making mistakes and attracting bad investors. They are attractive investing tools since they signal to investors that you are organized. Ensure that you have a founders’ agreement at the start of every new venture.
Essential Parts of a Founders’ Agreement
Like any contract, founders’ agreements should include several key guidelines you will want to integrate in your contracts to ensure that they are legal and comprehensive, including, but not limited to:
- Roles and responsibilities
- Ownership structure
- Co-founders as managers
- Percentage of shares distribution
- Capital contribution requirements
- Confidentiality
- Contractual communication
- Dispute resolution
- Non-Competition Clause
- Promissory notes
There are several essential key points that you will want to include when creating a founders’ agreement. However, these agreements are designed by attorneys to be thorough so that you won’t miss a single step in the legal process.
Getting Help With a Founder’s Agreement
Getting help with a founders’ agreement involves you learning more and speaking with startup lawyers. As you can see, several key aspects go into these agreements, and mistakes can leave your company in hot water. However, not having a founders’ agreement can make your venture less attractive from an investment perspective.
Don’t Make This Mistake
Avoid making the mistake of recycling another unsuccessful online founder’s agreement template. Do it the right way and hire startup Lexyom’s lawyers to create your custom-made founder’s agreement reflecting your new company’s true nature and values and attracting investors that want to work with you.
Legally Yours,
