Must-Have Clauses for a Startup's Founders Agreement

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So you and your co-founder have decided to start a business together. Congratulations! This is an important step, and it's crucial that you put in place a founders agreement to protect both of you. This document should cover everything from shareholdings to titles to time contributions until the venture is funded. It's also important to consider what happens if a co-founder falls behind on their commitments or decides to leave the company. In this post, we'll discuss the clauses that every founders agreement should include.

Must-have clauses for founders agreement:

  • Ownership: How will ownership be divided among the founders? This should be clearly laid out in the agreement.
  • Positions and titles: What positions and titles will each founder have within the company?
  • Time contribution: How much time each founder is expected to contribute to the business until it is funded.
  • Non-competition: founders should agree not to compete with the company they are starting.
  • Intellectual property: all intellectual property rights should be transferred to the company operating the venture.
  • irrevocability: once a founder agrees to these terms, they should not be able to change their mind – the intellectual property stays with the company.
  • vesting: What happens if a founder does not or cannot keep up their word and do not make the contribution expected of them? Should reverse vesting mechanisms be included?
  • dropping off: What happens if a founder wants to leave the company?
  • dispute resolution: How will disputes among founders be resolved?

The founders agreement is a critical document for any startup, as it sets out the expectations and commitments of the founders. Including these clauses will help make clear the expectations of all involved and protect both founders and the company they are building together.

Creating a founders agreement may seem like a daunting task, but it's worth taking the time to do it right.

In case you need us:

Amir M. Gruber, Attorneys @ Law

BSR 3 Tower, 13th Floor, 9 Masada St., Benei Brak 5120109, Israel

Tel: 072-2223111