Founders Agreement

It is important for a company’s founders to have an agreement among themselves even before creating an entity. Founders’ agreements are the product of conversations that should take place among a company’s founders at the early stages of formation rather than later in the life of a company. The goal of these conversations is to have an open and honest discussion about the attitudes, fears, and aspirations of individuals involved with the startup, so as to minimize the likelihood of debilitating surprises as the company continues to evolve. This module includes two documents: 1 A Conversation Guide. Answering these hard questions now will help you and your co-founders avoid personal conflicts in the future. 2 A Model Founders’ Agreement. A Founders’ Agreement is a contract that a company’s founders enter into that governs their business relationships. The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder. Generally speaking, it regulates matters that may not be covered by the company’s operating agreement. Ultimately, Founders’ Agreements are designed to protect each founder’s interests and memorialize that all founders are in agreement about the venture’s basic structure and how the founders will work together to move their business forward. Forging an agreement between all founders helps mitigate the risk of a lawsuit over who owns the business. There is a wide range of provisions that could be addressed in a Founders’ Agreement. The template below includes provisions about:  transfer of ownership;  ownership structure;  confidentiality;  decision-making and dispute resolution;  representations and warranties; and  choice of law. These are essential provisions that are commonly seen in Founders’ Agreements. Annotations explaining all of the provisions in the document are at the end of the agreement. The first four pages of the document are the template agreement. The rest of the pages contain helpful explanatory annotations which refer to provisions within the document itself