Founders often agree on the product and postpone the operating relationship. Trouble appears later around time commitment, salary, decision rights, equity, intellectual property, fundraising, side projects, information, or departure. A founders' agreement can organise those expectations before or alongside incorporation, but it must fit the chosen entity, constitutional documents, employment or consultancy arrangements, and any later shareholder documents. Equity vesting, transfer restrictions, restraints, IP assignment, and remedies need current legal and tax review. Treat the document as a discussion frame for the founders and their advisers. It is not a substitute for independent advice to people whose interests may differ. Put the awkward facts on the table, record where interests diverge, and check current company, contract, tax, employment, and intellectual-property law before signing.
Write what each founder is bringing
List cash, existing intellectual property, customer relationships, equipment, time, and other contributions separately. Then describe the role each founder will perform, expected weekly commitment, start date, location, reporting responsibilities, authority, salary or fees, expenses, and outside work. A promise to handle business or build product is too loose when one founder works full time and another remains employed elsewhere. State which assumptions are temporary and when they will be reviewed. If prior code, designs, brands, data, or inventions are expected to move into the venture, identify them and obtain advice on ownership and transfer. Do not describe third-party or former-employer material as a founder contribution. The conversation may show that equity and workload do not line up. That is useful information. Resolve it before incorporation or fundraising makes the gap harder to change.
- Cash and non-cash contributions
- Role, authority, and time commitment
- Salary, fees, and expense treatment
- Outside work and conflicts
- Existing IP and third-party restrictions
Make equity respond to participation
Record the proposed ownership, why it was chosen, and what happens if a founder never starts, leaves early, reduces commitment, dies, becomes unable to work, or is removed for serious cause. Vesting, reverse vesting, repurchase, transfer, valuation, and good-leaver or bad-leaver concepts must be drafted under the current legal and tax framework, not imported from a foreign template. Define any milestone carefully and choose who decides whether it was met. Consider dilution in future rounds and whether founders are expected to fund the company again. The cap table, subscription documents, constitutional records, employment terms, and founders' agreement should agree. If a promise cannot be implemented through the chosen structure, it needs redesign. Each founder may need separate advice where departure economics or control create conflicting interests. A clean table is useful. The underlying rights decide what the table means.
- Initial ownership and rationale
- Vesting or participation conditions
- Early departure and repurchase terms
- Valuation and payment mechanics
- Future dilution and funding
Design decisions for disagreement
Separate ordinary operating decisions from protected decisions. One founder may run product while another controls sales, but budgets, debt, hiring senior leaders, issuing equity, changing the business, selling key assets, entering related-party transactions, or accepting an acquisition may need a different threshold. State what information each founder receives and how meetings and written decisions happen. Deadlock language should fit the ownership and the seriousness of the decision. A quick casting vote may solve a routine budget question and be unacceptable for a sale. Escalation, mediation, buyout, or separation mechanisms need careful drafting and funding reality. Do not promise a forced purchase that nobody can finance. Consider what happens when there are only two founders and communication has broken down. The governance provisions should later align with the company's constitutional documents and any shareholders' agreement.
- Day-to-day role authority
- Protected decisions and thresholds
- Information and meeting rights
- Conflict and related-party process
- Fundable deadlock mechanism
Plan departure before trust is tested
A founder exit affects shares, board office, employment, system access, intellectual property, customer relationships, public communication, guarantees, and confidential information. Build one coordinated process. Define notice, handover, resignation steps, access closure, return of property, treatment of unvested or transferable interests, ongoing cooperation, and dispute escalation. Restrictive covenants and confidentiality should be reviewed for current enforceability and drafted around real business interests. The agreement should also address death or incapacity and the position of estates or nominees. Founders may need independent advice when interests diverge during an exit. Keep corporate approvals and statutory records in view, since a contractual promise alone may not update the company register. Review the arrangement after a funding round, major role change, marriage of a founder's personal guarantee to company debt, or entry into a regulated activity. The departure clause is a continuity plan, not a prediction of failure.
- Board, employment, and ownership steps
- Handover and system-access closure
- Confidentiality and current restraint review
- Death, incapacity, and estate treatment
- Trigger for agreement refresh
Primary sources and further reading
Rules and procedures change. Check the current official source and obtain advice for the facts of your matter.