Founders Agreement

The Founders Agreement is a legally binding contract that outlines the responsibilities, ownership, and initial capital investment of co-founders in a business entity. It is usually created at the early stages of incorporation to ensure clarity regarding each founder's roles and responsibilities, thus avoiding ambiguity. The agreement helps to establish a solid foundation for the business and ensures that all parties involved are on the same page.

1. Define the type of business being formed.
2. Information about the Capital Investment made by the founder.
3. Clearly state the ownership structure.
4. Outline the roles and responsibilities of each co-founder.
5. Specify compensation or remuneration for each co-founder.
6. Include provisions for exiting from the business.
7. Specify formalities for dissolution of the business.
8. Provide details about dispute resolution.
9. Include other necessary provisions as deemed by the co-founders.

It is always advisable to document the Founders Agreement in writing, rather than relying on an oral contract. The agreement should be drafted by a team of experts to avoid any loopholes that may later be exploited by other co-founders. The agreement should ensure fairness and equality for all co-founders who have invested their time, money, and efforts in building and growing a business.

1. The founder's agreement helps to determine the type of business entity and provides clarity on it.
2. It outlines the vision, mission, and detailed business plan of the founders, helping to derive the same for allied stakeholders.
3. The agreement clearly lays out the roles, responsibilities, and ownership structure of each founder, preventing future disputes.
4. It acts as a base for solving any disputes or conflicts between founders and outlines the procedures for decision-making.
5. The agreement also specifies compensation or remuneration in case of rule violations or problems.
6. The expulsion of a founder due to fraudulent activities or misappropriation of funds can be regulated using the agreement's detailed procedures.
7. Confidentiality of the founders' decisions can be maintained using the agreement.

Step 1: Create a draft of the Founders Agreement that includes all the necessary details, such as the terms, objectives, investment, and dispute resolution procedures. Make sure to include all relevant points that the co-founders should follow and comply with.

Step 2: Check the draft agreement to ensure that it does not have any loopholes or missing provisions. Avoid adding unnecessary clauses or details that could complicate matters.

Step 3: Review the final draft of the Founders Agreement with all co-founders to ensure that it meets everyone's requirements. Make suggestions for any changes, additions, or deletions that need to be made, or accept the draft as it is.

Step 4: Once the co-founders have accepted the agreement, print it on non-judicial stamp paper and notarize it.

Step 5: Have all the co-founders sign the notarized Founders Agreement to make it legally binding for each one of them.

1. Equity and Ownership: The founders should determine the equity ownership and vesting of shares based on investment and other methods like time-based or milestone-based vesting.
2. Share Transfer: The agreement should specify any restrictions on share transfers, including a lock-in period, and the reversion of shares to the entity if a founder leaves the company.
3. Intellectual Property Allotment: The clause should ensure that any intellectual property developed and used by the company belongs to the entity and not any individual founder.
4. Restraint on Trade: This clause should prevent founders from engaging in any activities or businesses that contradict the entity's objectives, including avoiding direct competition with the company.
5. Employment Terms: The agreement should include terms and conditions for co-founder employment, such as part-time or full-time, compensation, benefits, and perks.
6. Dispute Resolution: The agreement should establish a dispute resolution mechanism that is easy and effective within the entity.