Founders Agreement service
We offer customized solutions designed to meet your specific requirements, encompassing aspects such as business structure, business plans, and audits. Our team of experts is dedicated to providing your start-up business with the optimal opportunity for success.
What is a Founders Agreement?
This document is a legally binding agreement executed by the founder(s) of a company, encompassing the individuals involved, their respective contributions, responsibilities of directors, the schedule for the distribution of equity, and the protocol to be followed in the event of a departure.
Launching a remarkable business concept requires substantial dedication and effort. Initially, it is crucial to contemplate a business strategy and plan, secure startup funds, and establish a suitable organizational framework alongside your fellow co-founders.
While not obligatory, it is advisable to draft this contractual agreement early on in the company’s lifecycle before proceeding further.
What should be included in a
Founder’s Agreement?
Although a Founder’s Agreement doesn’t have a fixed structure, it’s important to consider the following key aspects that you may want to include:
Including the first aspect is essential and thus should be included without fail. Firstly, document the names of all individuals involved. Additionally, ensure that the name of your company is incorporated, even if it may undergo changes in the future.
This is the stage where you determine the ownership distribution among all members of the company, including yourself and your co-founders. It’s important to note that changes in the company can affect these ownership percentages. If your company is structured as an LLC, it is crucial to determine the ownership shares of each member. This involves assessing whether each person is solely a financial owner or if they also contribute to the operational aspects of the business.
Each founder of a start-up must have made a contribution to become a founder. This could include cash, property, services rendered, a financial commitment, or a combination of these. In the case where a co-founder provides a non-cash contribution, it is necessary for all founders to assess the monetary value of that item and record it in the document. Additionally, it is important to decide whether the founders will continue to contribute capital throughout the lifespan of the company or only during the initial investment.
This section pertains to establishing your expenditure and budgeting plans. It is possible that you may not have precise figures at this point, but it is important to outline how you intend to handle budgets in the future.
Who will have the authority to approve the overall budget? Can specific individuals be authorized to approve it? Similarly, how will expenses and future funding rounds be approved? It is crucial to clearly state all these details within this section.
Who is eligible to participate in the voting process for company decisions? Certain businesses allocate voting rights based on percentage interests, whereas others restrict voting rights to specific groups. Furthermore, there are instances where a supermajority vote, a veto right, or even administrative rights without voting power may be granted.
Typically, founders hold a significant portion of the company’s shares. However, in some cases, a founder joining later may be granted share options instead of immediate share ownership. It is important to clarify in the founder agreement whether shares or options should be awarded.
To mitigate the risk of co-founders leaving the company and retaining a significant stake, a share vesting schedule can be implemented. This schedule distributes shares or options gradually over time or upon achieving specific milestones. This safeguard ensures that future investors are not left with nothing if co-founders decide to depart the company prematurely.
Why Choose Us
When individuals embark on starting a business, they tend to seek assistance from their network of friends, family, or colleagues to assemble a team.
Forming a Corporation.
Your agreement outlines the vision and mission of the entity and establishes both long-term and short-term objectives.
Appropriate structure
We are capable of assisting you in determining the optimal business structure that suits your requirements, as well as supporting you in maximizing your tax advantages.
Seed Legals Founders Service Agreement service
SeedLegals, our legal partner, offers a founders agreement template that is both fast and straightforward. It will generate agreements that safeguard you and your co-founders while efficiently allocating equity from the very beginning.
When conducting their due diligence, investors will seek this documentation. Hence, it is crucial for you and your co-founders to have a signed Founders Service Agreement in place now.
The Founder’s Pledge has been devised to provide protection for both the founders and the company in the event of unforeseen circumstances.
FAQs
The difference between a Founders Pledge and Founders Service Agreement
The Founder’s Pledge serves as a streamlined alternative to the Founders Service Agreement, typically employed by early-stage companies. As you embark on your initial funding round, it is customary to transition from the Founder’s Pledge to a full-fledged Founders Service Agreement.
I’m a solo entrepreneur, do I need a Founders Service Agreement?
Absolutely! The Founders Service Agreement plays a crucial role in safeguarding both the company and the founding team. When it comes to attracting investors, they will anticipate the inclusion of warranties, IP assignment, and confidentiality clauses within the Founders Service Agreement.
What should a Founders Agreement include?
Here is a list of what should be included:
- Names of Co-Founders and the Business and rules.
- Company Goals.
- Each owner’s roles and responsibilities.
- Breakdown of equity.
- Vesting Schedule.
- Intellectual Property.
- An exit clause.
What is the importance of Founder’s Agreement?
By explicitly outlining the duties and responsibilities of the founders, as well as establishing a strong management and dispute resolution mechanism, it serves as a valuable tool in preventing and resolving disagreements among the founders.
How long does it take to write is a Founder’s Agreement?
Completing the entire process typically requires approximately three to four business days, during which you should thoroughly review the document alongside your co-founders.
How do you calculate Founders equity?
To determine equivalent ownership equity splits, the total equity shares (100%) are divided by the number of co-founders. For instance, if there are five co-founders, each would receive a 20% equity stake.
Do all Founders need to sign a Founders Service Agreement?
Indeed, each member of the founding team is required to sign an individual Founders Service Agreement, as they are separate documents for each founder.