If you’re in the process of starting a new business, one of the most important documents you can create is a co-founder agreement. This agreement is a legal document that outlines the responsibilities and expectations of each co-founder, along with how the company will be managed and how any disputes will be resolved.

Why Do You Need a Co-Founder Agreement?

A co-founder agreement is essential when starting a new business because it helps prevent misunderstandings and conflicts between co-founders. When starting a business, it’s easy to get caught up in the excitement and optimism of starting something new. Everyone is working towards a shared goal and it’s easy to assume that everyone is on the same page. However, as the business grows and changes, disagreements are bound to happen.

By having a co-founder agreement in place, you can anticipate potential issues and create a plan for how to deal with them. This can help you avoid the need for costly litigation down the road.

What Should a Co-Founder Agreement Include?

A good co-founder agreement should include the following sections:

1. Founders’ Roles and Responsibilities

This section should outline the specific roles and responsibilities of each founder. This can include everything from day-to-day tasks to long-term strategy.

2. Equity Ownership

This section should outline the percentage of equity ownership for each founder. It’s important to be clear about how much ownership each person has from the outset.

3. Vesting

Vesting refers to the process by which a co-founder earns equity over time. This section should outline the vesting schedule for each founder’s equity.

4. Decision-making

This section should outline how decisions will be made within the company. Will decisions be made by consensus or will one person have ultimate decision-making power?

5. Dispute Resolution

This section should outline how disputes between co-founders will be resolved. This can include mediation, arbitration, or another form of dispute resolution.

6. Intellectual Property

This section should outline who owns the intellectual property associated with the company. This can include patents, trademarks, and copyrights.

Final Thoughts

Starting a new business is an exciting and challenging time. A co-founder agreement is a critical tool for ensuring that everyone is on the same page from the outset. By outlining roles, responsibilities, ownership, and dispute resolution, you can set your business up for success from day one.