Co-founder Agreement

What’s a co-founder agreement and when should you use it ?

A co-founders agreement is a legal contract that a start-up’s founders enter into.

The primary purpose is to establish who the founders are, what technology and business is being developed, what everyone’s role and responsibilities are and how the equity is being distributed and on what terms.

The agreement helps to protect founders in the event that one or more of the co-founders try to leave or exclude other founders from profits or benefits of the technology or business that was created.

It’s a legally binding contract and should be created at the beginning of the company’s lifecycle, in order to get everything out on the table before all the co-founders formally work together.

This is a straightforward agreement for two or more individual co-founders to sign at the start of their collaborative efforts.

It’s not a standard shareholder agreement but does set out how shares should be held as and when a shareholders agreement is drafted.

You’ll find our standard shareholders agreement here

All other shareholders, including any future collaborators to whom you want to extend the title ‘co-founder’, should sign a different agreement when shares are issued outside of this very initial arrangement.

What else might you need?

Co-founder agreements sometimes cover vesting arrangements, setting out what will happen with the ownership stakes of each co-founder, particularly if one of them should leave early on in the company’s history.

Setting out your intentions in a co-founder agreement is highly recommended.

Here you can include what will happen to intellectual property that you may both contribute, how you will handle day-to-day workload and split up responsibilities, whether either of you will take a salary and if so, at what level, etc.

One of the biggest causes of start-ups not getting off the ground is co-founders falling out over issues such as these.

Setting them out here and now ensures that there is far less ambiguity about everyone’s intentions, right from the start

Our guide to co-founders agreements  will help you understand the importance of such an agreement for your business.