Get Partner/Founder Agreements in Place

What if someone wants out of the business a year later, becomes disabled, or dies? If someone leaves for any reason, how will the remaining partners value the company at that time, and how should shares be divided?It’s important to make sure everyone starts the venture on the same page, with their roles set forth and with an agreed-upon framework in place for heated situations likely to come up down the line. Unraveling a knot later can take months, and it often unravels the company and friendships, too.

“The goal is to ensure the deal between co-founders is set in stone so everyone can focus on building the business.” 

Creating a Founders’ Agreement

Here are the steps you should take to create one:

  • Set a Timeline. A founder’s agreement is one of those things that lingers unless you hold yourself accountable to a date.
  • Use a Template. There are many templates for founders agreements available There are plenty of templates available online for you to peruse. Choose the one you feel most comfortable with. Remember the template is just a starting point so don’t be concerned about the final language at this point. Here is another.
  • Complete The Basics. Fill our the simple stuff including name, company, addresses etc.
  • Discuss the Issues with Your Co-Founders. Try to get aligned on the fact that you agree that this is necessary and will help both of you. Go through one by one the issues – compensation, equity, vesting schedules, roles and responsibilities, termination clauses- and talk it through. This will likely take several rounds of discussion. You want to walk away on the same page on all the major issues. This is easier said than done, but try to reinforce that you are both doing it to benefit everyone including the business.
  • Take Your Agreement to an Attorney. Your agreement will give them a good start and experienced attorney’s in this area will be able to fill in the blanks. In addition, the attorney can act as a go-between for you and your co-founder if there are issues you can’t resolve. Lawyers aren’t free but they can add a lot of value in getting an agreement in place that everyone supports.
  • Review – Separate and Together. The lawyer should prepare a draft agreement for you and your co-founders. You should read it separately and then go through it together to lay out differences and points that need more discussion or clarification.
  • Finalize and Sign. Bring your collective comments back to your lawyer and have him prepare a final agreement for review and signature.

The process may vary for you but these steps should help you stay on track to accomplish this important step.

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