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How to Write a Founders Agreement

Writing a founders agreement is one of the most important things you can do when starting a business. It outlines the roles, responsibilities, and ownership of each founder, and can help prevent misunderstandings and conflict down the road. If you`re unsure of how to write a founders agreement, this guide will provide you with the essential steps to follow.

Step 1: Discuss ownership and equity

The first thing you need to consider when writing a founders agreement is the ownership and equity distribution. You need to decide how much equity each founder will hold, and what happens to that equity if a founder leaves the company. It`s important to be clear about this from the beginning to avoid conflicts later on.

Step 2: Define roles and responsibilities

You`ll also want to define each founder`s role and responsibilities within the company. This includes decision-making power, daily duties, and any specific areas of expertise that each founder brings to the table. This will help ensure that everyone is clear about their job and can work together effectively.

Step 3: Set up a process for decision-making

To avoid any decision-making conflict, it`s important to outline the process for making major decisions. This includes setting up a voting system, deciding who has the final say, and what happens if a decision cannot be made. This will ensure that important decisions are made in an efficient and fair manner.

Step 4: Address funding and investments

Another important aspect of the founders agreement is addressing funding and investments. This includes detailing each founder`s monetary contribution to the company, as well as outlining how much funding the company needs to get started and where that funding will come from. This also includes addressing any potential future investments and how they will be handled.

Step 5: Create an exit strategy

Finally, it`s essential to create an exit strategy in the founders agreement. This outlines what happens if a founder decides to leave the company, if the company is sold, or if any other major changes occur. It`s important to be clear about what happens in each of these situations to avoid conflicts and ensure a smooth transition.

In conclusion, writing a founders agreement may seem like a daunting task, but it`s one of the most important things you can do to ensure the success of your business. By following these essential steps, you`ll be able to create a clear and effective agreement that can help prevent misunderstandings and conflict down the road.