Flat-fee founders' agreement drafting for startups and early-stage companies — equity split, vesting, IP assignment, departure provisions, governance, and the six other things co-founders should agree on in writing on day one.
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Co-founder disputes are the leading cause of avoidable startup failure. Most of those disputes trace back to issues that could have been resolved with a written founders' agreement at the start — issues that seemed obvious or unimportant when everyone was aligned, then became catastrophic when the relationship strained. A well-drafted founders' agreement covers six things: equity split, vesting (the most important), IP assignment, roles and decision rights, departure provisions, and governance. Each one matters; getting them written down before they're contested is dramatically easier than negotiating them under pressure.
The single most consequential provision is vesting. Founders typically receive their equity at formation — but if a founder leaves three months later, default rules let them keep the full equity stake forever. The remaining founders, who continue building the company, end up with a major shareholder who isn't contributing. This is a known and avoidable problem. Standard founders' vesting provides for the founder's equity to vest over 4 years with a 1-year cliff (no equity vests in the first year; if the founder leaves before the cliff, they get nothing; after the cliff, the remaining 75% vests monthly over 3 years). Founders who leave early forfeit unvested equity back to the company. This protects everyone, including the leaving founder, who receives back any contributed work product or capital.
The second most consequential provision is IP assignment. Without explicit assignment, work created by a founder before formation often belongs to the founder personally rather than to the company. This becomes a problem when investors do diligence (they'll want to see clear company ownership of all IP), or when a founder leaves (they may claim the company doesn't own work they created), or when the company is acquired (chain-of-title issues can stop a deal). Founders' agreements should include IP assignment from each founder to the company for any work product related to the business, predating formation. This is standard but easy to miss.
The most emotionally charged part of the conversation, and often the part that founders try to skip. We ask each founder to think about their contribution — capital, work, IP, customer relationships, network, prior experience — and articulate what they're contributing. Equity splits don't have to match contributions exactly, but lopsided splits without articulated reasoning often produce later resentment. We don't tell founders what their split should be; we facilitate the conversation and document the result.
Standard founders' vesting is 4 years with a 1-year cliff: 25% vests at the 1-year mark, the remaining 75% vests monthly over the following 3 years. Founders who leave before the cliff forfeit all unvested equity; founders who leave after the cliff forfeit any unvested portion. We sometimes vary this for specific situations (longer vesting for founders contributing critical IP, shorter cliff for founders who've already worked together for a long time pre-formation), but 4-year-with-1-year-cliff is the default for good reasons. We also handle 'good leaver' vs. 'bad leaver' provisions — accelerated vesting for involuntary terminations, no acceleration for voluntary departures.
Each founder assigns to the company any work product related to the business, including pre-formation work. This is critical for clean chain of title. We use standard assignment language but verify it covers the founder's specific situation — particularly if a founder is leaving an existing job and may have employer-IP issues, or if a founder created prior work that's being contributed to the company.
Who decides what. Standard provisions: certain major decisions (selling the company, taking on substantial debt, hiring/firing other founders, raising capital) require all founders' consent or super-majority. Day-to-day operations are typically allocated by role. We structure these provisions to match how the founders actually intend to operate.
What happens if a founder leaves. Vesting acceleration on involuntary termination (sometimes). Buyback rights for the company on voluntary departure. Repurchase price (typically minimal — fair market value at the time of departure, or a defined formula). These provisions interact with vesting — vesting controls how much equity the leaving founder keeps; buyback determines what happens to the equity they did keep.
How the company operates day to day. Officer roles. Board structure (if applicable — some founders form with a board, most don't until they raise capital). Confidentiality. Non-compete and non-solicit (where appropriate and enforceable). Amendment procedures. Dispute resolution.
Founders' agreements are often drafted alongside entity formation (LLC operating agreement or corporate shareholder agreement that includes the founders' provisions). For pre-formation companies, we sometimes draft a standalone founders' agreement that the founders sign before incorporation, then incorporate the provisions into the entity documents at formation. Both approaches work; the standalone-then-incorporate approach is sometimes useful when founders want to lock in terms before working through formation logistics.
Standalone founders' agreements price based on complexity — number of founders, equity structure complexity, vesting nuances, and whether the agreement is being negotiated between aligned parties or contested between parties with different interests. Bundled formation + founders' agreement (drafted as a single engagement) typically prices below the sum of the two services because the substantive overlap reduces total work.
For startups planning to raise institutional capital, the founders' agreement should align with what investors will expect — standard vesting, full IP assignment, clean cap table. Drafting with this in mind from the start is dramatically easier than retrofitting before a financing round.
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Not too late, but harder. The earlier the agreement is signed, the easier the conversation — when everyone is aligned and the business is in early stages, founders are typically willing to agree to standard terms (4-year vesting, full IP assignment) without much pushback. As the business develops and individual founders' contributions become more or less central, the conversation gets harder. We routinely retrofit founders' agreements for companies a few months in, but the conversation tends to be more substantive.
Trust isn't the issue at the start; the issue is what happens later. Equal splits are fine if everyone stays equally engaged and contributing. The structure breaks down when one founder leaves, or contributes substantially less than others, or develops different priorities. Without vesting and departure provisions, the equal split locks in regardless of contribution. Co-founder disputes typically aren't about bad faith — they're about misaligned expectations that weren't documented.
Yes, especially for small startups. The smaller the team, the more disruptive a departing founder's retained equity is. A 3-founder startup where one founder leaves with 33% equity intact has a 33-percentage-point shareholder problem; the same situation in a 10-person mature company is more diluted. Vesting is sometimes more critical for early-stage companies than for mature ones.
Common situation. Several approaches work. The IP can be valued and treated as a capital contribution toward the founder's equity. The founder can receive equity that vests over time even while contributing less than full-time work (with the understanding that the equity reflects the IP contribution rather than ongoing labor). The IP can be licensed to the company rather than assigned, with the founder retaining ownership but the company having usage rights. Each approach has tax and operational consequences; we discuss the trade-offs.
For LLCs, founders' provisions are typically incorporated into the operating agreement. For corporations, founders' provisions are typically in a shareholder agreement plus restricted stock purchase agreements (which handle vesting). Some clients prefer a standalone founders' memorandum signed before formation that captures the agreed terms; we then incorporate those terms into the formal entity documents. Either approach works.
Flat fee set in writing before any work begins, scaled to founder count and complexity. Standalone founders' agreements price differently than bundled formation + founders' agreement engagements. Get a free quote in under an hour.
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