Co-Founders & Partnership Agreement Checklist
Never launch a business on verbal trust alone. Over 70% of early-stage startups fail or stall due to internal partner conflicts. Here is the legal framework to protect your company, equity, and intellectual property.
The Harsh Reality: Why Handshake Agreements Fail
When friends or colleagues start a business, enthusiasm is high and everyone assumes goodwill. But six months in, reality strikes: one partner works 70 hours a week while the other takes a corporate job, or one founder wants to sell equity while the other wants to reinvest profits. Without a written legal agreement, you have zero recourse to remove a non-performing partner.
8 Non-Negotiable Clauses Every Founder Agreement Must Have
The #1 most critical clause. Founders should not own 100% of their equity on day 1. Instead, equity must vest over a 3 to 4-year period with a 1-year cliff. If a partner abandons the company after 6 months, their unvested shares return to the company rather than freezing your cap table.
Ensure that all software code, product designs, domain names, customer lists, and brand assets created by any partner are 100% legally assigned to the company entity, not owned by individual founders personally.
Clearly document executive titles (CEO, CTO, COO), daily job descriptions, and expected hours per week. Define what happens if a founder takes up moonlight employment or outside consulting.
Categorize everyday operational decisions (majority vote) versus reserved corporate matters requiring unanimous partner approval (taking bank loans, hiring executives, selling company assets, or issuing new shares).
Specify initial cash contributions into the current account, and outline what happens when the business needs additional cash: if one partner injects money and the other cannot, how does equity dilution work?
If one partner wants to leave or sell their stake, they must first offer their shares to existing co-founders at fair market valuation (ROFR) before approaching third parties or competitors.
Prohibit departing partners from starting a direct competing business or poaching key team members and clients for a period of 1 to 2 years following their departure.
In a 50-50 equity split, disagreements can freeze operations entirely. Pre-agree on an escalation path: structured negotiation, external mediation by a mutually trusted advisory firm, followed by binding arbitration rather than multi-year civil court litigation.
Need a Customized Founders' Agreement or Partnership Deed?
D BIZ CONSULTANCY drafts customized, legally binding agreements tailored to your industry, equity structure, and investor expectations.