What is a Founder agreement?
It’s a legally binding contract and should be created at the beginning of the company’s lifecycle. 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.
What is the Purpose of the Founder Agreement?
A founders’ agreement is a baseline for how your co-founder relationships will work in the future, how your company is structured, and what each owner brings to the business. It’s important no matter what type of business entity structure you have.
Here are some of the reasons why having a founders’ agreement is essential:
- Clarifies each owner’s role in the business
- Provides a structure for resolving disputes among founders
- Provides clarity if and when a partner wants to enter or exit the business
- Protects minority owners
- Signals to investors that you have a serious business
What will be included in the founder agreement
- Name of all the founder
- Purpose of Business
- Equity Distribution
- Exit clause
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