The founders' agreement questions nobody wants to ask

Founders postpone the founders' agreement because the conversation feels like an expression of distrust. In practice it is the opposite: the document exists so that a disagreement between people who like each other does not become a dispute between people who no longer do.

It is also, in our experience, the single cheapest piece of legal work a company will ever commission relative to the cost of not having it. What follows are the questions the document has to answer.

What happens if someone leaves?

This is the question the agreement exists to answer. If a co-founder departs in month eight holding a third of the company, and nothing was agreed, they keep that third while the remaining founders do the work — and they keep it through every future round, diluting alongside everyone else but contributing nothing. Vesting solves this, and it protects everyone equally, including the founder who leaves for entirely good reasons.

Agree the cliff, the vesting period, and what counts as good and bad leaver treatment. A common structure is a one-year cliff with monthly vesting over four years, but the right answer depends on how much of the value was created before incorporation. Write it down while the answer still feels academic; once someone is actually leaving, every proposal reads as an attack.

Who decides what?

Equal equity does not mean every decision needs unanimity. A company where three founders must agree on a hiring decision moves slowly and resents itself. Identify the small set of decisions that genuinely require everyone's consent — raising capital, taking on debt, changing the business fundamentally, selling the company, issuing new shares — and let ordinary operating decisions rest with whoever owns that function.

Then decide what happens at deadlock, because on the decisions that do require unanimity, deadlock is possible. A casting vote, an escalation to an independent director, or a defined buy-out mechanism are all workable. Nothing at all is not.

What is each person actually committing to?

Full-time or alongside another job? For how long? At what salary, and from when? Founders frequently hold different private assumptions about this, and discovering the mismatch a year in is expensive in money and worse in goodwill. One founder drawing nothing while another draws a market salary is workable if it was agreed; it is corrosive if it was not.

Say what happens if someone wants to reduce their commitment. That is a normal thing to want, and a normal thing to plan for.

Who owns the work?

Intellectual property created before incorporation does not belong to the company simply because it was made for it. The code written in the months before the company existed belongs to the person who wrote it, unless it has been formally assigned. Assign it explicitly, and have every founder and early contractor sign an assignment.

This is the first thing a serious investor's counsel will check, and an unassigned core asset can stall a funding round for weeks at exactly the moment you have no weeks to spare. It is a half-day of work to fix now and a diligence emergency later.

Keep it proportionate

A founders' agreement is not a long document and it does not need to be adversarial. Ours generally run to a dozen pages. It needs to be specific, it needs to reflect what the founders have actually agreed rather than a template's defaults, and it needs to exist before anyone needs it.

If you are putting it off because the conversation feels awkward, that is the strongest possible argument for having it now, while the stakes are still hypothetical.