A founders’ agreement is a document that regulates the relationship between people who create a company. It is not strictly necessary, but it clarifies the rights and responsibilities of everyone involved and prevents confusion and conflicts down the line. Use our free founders’ agreement template whenever you start a business jointly.
Our founders’ contract template aims to lay down the cooperation fundamentals between the signing parties. This includes their duties and obligations, as well as vesting and equity ownership conditions.
The undersigned (each a “Founder” and together the “Founders”) are collaborating with the purpose of developing together a “Business Concept” related to the following:
[Project name] , which concerns [brief project description of one or two sentences, including any key dates if needed] .
Founders agree that all related technology to the Business Concept is also owned by the Founders pursuant to this Agreement (together, the “Business Concept and Technology”). As the Business Concept is further developed, the Founders intend to transfer the Business Concept and Technology to a [State — either California or Delaware] Corporation that shall be formed by the Founders (the “Company”) upon the earliest of the following circumstances: [Detail when the project will become a company.]
Feel free to attach a timeline made in Word or Excel about when the project will become a company. All co-founders need to be on the same page — even if many of the provisions in this Agreement may change in the future.
The Founders hereto agree to transact the Business Concept and Technology through the corporation [Operational Company Name] (the “Operational Company”), a [State] corporation with a business address of [Operational Company Address] . Parties agree that the Operational Company has no rights in or to the Business Concept and Technology.
In connection with such collaboration of the Business Concept and Technology and in consideration for a mutually agreeable framework that shall serve as the foundation for the Founders to successfully develop the Business Concept and Technology, the undersigned hereby agree as follows:
Each Founder shall grant and assign to the Company immediately upon its formation all right, title, and interest in and to the Business Concept and Technology (including all right, title, and interest to intellectual property thereto), including all ideas — however formed or unformed — and labor and/or work products that result from any task or work performed by the Founder that relates to the Business Concept and Technology for the full term of such rights.
Each Founder shall also perform any and all acts and execute all documents and instruments as may be required by the Company at its sole discretion to perfect title in the Business Concept and Technology and any related intellectual property.
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Each Founder agrees to contribute the following amount(s) of non-refundable initial capital to account for potential and expected company expenses:
If each founder has a different amount/method of contributing non-refundable initial capital, you can create a table with columns for each founder’s name, method of contribution (i.e., through cash or through property such as computers, etc.), and contribution value (e.g., $500,000).
Additional capital contributions may be made to support the Company’s ongoing operational costs and will only be made through the mutual written consent of all Founders.
Upon formation of the Company, the entire issued share ownership of the Company shall reflect the following (the “Founder Equity”):
| Person | Shares | Equity Percentage |
|---|---|---|
| [Founder 1.FullName] | [Founder 1 Shares Amonunt] | [Founder 1 Shares Percentage] |
| [Founder 2.FullName] | [Founder 2 Shares Amonunt] | [Founder 2 Shares Percentage] |
Should the Founders wish to reserve any portion of the Founder Equity for future employees or for a share option pool, any such portion of the Founder Equity reserved will dilute all Founders equally.
Upon formation of the Company, each Founder shall be elected by the Company to serve as [position, e.g., CEO/Chairman/Member on the Board of Directors] .
The Founder Equity issued to each Founder shall vest accordingly:
“Cliff” refers to cliff vesting, which is when someone becomes fully vested on a specific date rather than gradually becoming vested over an extended period of time. After the cliff period ends, the person will receive full benefits. In this case, Founder 1 will have full interest in the Company.
The Founder Equity shares issued to each Founder shall come from the same class and series such that there are no differences in the rights (including but not limited to distribution and voting rights) accorded to the shares issued to each Founder.
Sale of the Company to an interested third party shall take place if the sale is authorized by the Board of Directors and holders of a majority of the outstanding shares and is otherwise in conformity with all applicable state and federal laws.
The Founders will be compensated as [part-time or full-time] employees. For the purposes of this Agreement, full time means working for the Company for [number] hours per week.
Remove this section if the founders will not be compensated other than from equity ownership. It’s common for a founder to feel like they deserve a salary if they are working full time for the Company. Compensation should be at fair market value or above. Consider giving a founder a high salary if they are the only founder working full time and the other founders have outside jobs.
Day-to-day decisions will be made by [majority vote or unanimous vote or the CEO] , whereas key decisions will be made by [majority vote or unanimous vote or the CEO] .
Day-to-day decisions consist of:
Key decisions consist of:
The Founders agree to keep the Business Concept and Technology confidential. Disclosure of the Business Concept and Technology will occur only on an as-needed basis and only upon consent of all the Founders.
Notwithstanding such unanimous consensual disclosures, the Founders shall take all necessary steps to keep the Business Concept and Technology confidential until the formation of the Company, at which time the Founders shall further detail and define any confidentiality obligations.
If the Founders have not yet formed a Company within [number] year(s) of signature, the Founders agree to discuss the benefits of continued collaboration related to the Business Concept and Technology and will discuss a mutually agreeable timetable for the formation of the Company.
To prevent the Company formation from dragging on indefinitely, you can add a clause that limits how much more time the founders will have to form the Company. For example, you could write, “If the Founders have not yet formed a Company within [number] year(s) of signature, the Founders will have an additional [number] [period, i.e., days/weeks/months] to take steps towards forming the Company. If the Company has not been formed after [number] [period, i.e., days/weeks/months] , the Founders will execute a separation agreement that divides the rights to the Business Concept and Technology and any other assets accumulated by the Founders while developing the Business Concept.”
In the event that the Founders do not wish to continue their mutual collaboration, the Founders shall discuss a mutually agreeable separation and division of assets of their collaboration.
The Founders shall further define any and all confidentiality obligations related to the Business Concept and Technology. Consistent with Cal. Bus. & Prof. Code § 16600, et seq., in no circumstance shall the underlying Business Concept be considered confidential upon termination of this Agreement.
In the event that the Founders are unable to agree to a mutually agreeable separation, the Founders agree that they will submit to a binding confidential mediation to be held in [City (State)] , [Country] , and conducted by a mediator who has been mutually agreed upon.
The Founders agree and acknowledge that all provisions of this Agreement, including confidentiality provisions, shall be binding till the end of this mediation process. The costs of the mediation shall be borne equally by all Founders. The Founders hereby waive any and all right to have this Agreement adjudicated by a court or jury.
Modify this section as needed if you prefer another way of solving potential disputes, such as negotiation or arbitration. You can also make this a two-step process if you’d like to have multiple ways of resolving disputes. For example, you can have the founders use negotiation first and only resort to mediation if the dispute can’t be settled through negotiation.
Each Founder, individually and not jointly, represents and warrants that they are not party to any other agreement that would restrict such Founder’s ability to perform the obligations as set forth in this Founder Collaboration Agreement.
Each Founder represents and warrants that no third party can claim any rights to any intellectual property or other proprietary right possessed by that Founder as it relates to the Business Concept and Technology.
Each Founder also represents and warrants that they have not been subject to [any representations and warranties that you want to include to protect your interests, e.g., petitions under bankruptcy laws; criminal proceedings or conviction therein; or any court order, judgment, or decree limiting their engagement in business] .
Each Founder is aware that by making such representations and warranties, they are assuming personal liability risk.
To prevent future disputes, consider seeking legal advice from your lawyer or reference legal agreements from RocketLawyer to make your founders’ agreement as clear as possible.
This Agreement shall be governed by and construed in all respects in accordance with the laws of [State] , [Country] .
This Agreement may not be orally changed, modified, or terminated. Any oral waiver of its terms will be deemed null and void. This Agreement may only be changed, modified, or terminated by a notice or agreement in writing signed by all the Founders.
Any Founder may resign from the Company by giving [number] days of written notice to the other Founders. Once a Founder has resigned, the Company will pay out to the resigning Founder any positive capital account balance within [number] days of resignation.
If all the Founders resign, the Company will dissolve. This Agreement will instantly terminate upon completing the winding up of the Company’s affairs and distribution of its assets and liabilities in accordance with this Agreement.
If a court of competent jurisdiction holds any of the provisions of this Agreement to be invalid, illegal, or unenforceable, the remaining provisions will remain in full force and effect. The Founders will amend this Agreement to give maximum effect to the stricken clause as needed.
All previous agreements and understandings — whether oral or written — are merged into this Agreement, which alone fully and completely expresses the Founders’ Agreement. No party will rely on any representation or statement made by another party to this Agreement that is not found herein.
IN WITNESS WHEREOF, the Founders have signed this Agreement.