If you are starting a new company with other people, a founder’s agreement is crucial to protect your fledgling enterprise as well as your personal assets. Here are some tips on how to structure that agreement:
Delegate roles and responsibilities. Typically, people who go into business together have different strengths that play off each other to the benefit of the company. However, sometimes there can be confusion when the partners’ specific roles and responsibilities are unclear. Consensus can be important for major decisions, but can cripple a new venture if every little decision has to be agreed upon by all parties. Having clearly delineated lines of responsibility will help you cut down on the growing pains of a new business and create the necessary accountability for a fully functional organization.
Allocate ownership. Establishing how equity in the enterprise will be split among founders should be done early on so that misunderstandings don’t occur once the profits start to roll in. The negotiation may be delicate, especially if not all founders are equal, but it’s a conversation you need to have sooner rather than later. You should also determine market vesting terms for each founder’s equity in case one founder decides to leave early or there is a split.
Assignment of intellectual property. Every business has intellectual property, and yours will be no different. Whether it’s a proprietary technology or product, you must have the intellectual property assigned to the company so that the business retains the right to that intellectual property and can use it to grow and prosper. If one of the founders develops a technology or product that is not assigned to the company and then leaves with it, this could cripple the future of your business.
Johnson Legal PC has extensive experience in providing legal guidance during the start-up phase of small organizations, as well as during the more mature periods of organizational growth that larger business and corporations face. Contact us to learn more about how a great corporate attorney can help your business thrive.