The eleven clauses
Work through these in order. Each one is a decision, not a paragraph to copy — the wording is the lawyer's job, the answers are yours.
1. Equity split and share classes
Exact percentages or share counts per founder, the class of shares, and whether anyone holds shares in exchange for cash rather than work. State the option pool you're reserving for employees so nobody is surprised by the dilution later.
2. Vesting and the cliff
Four years with a one-year cliff is the norm. Name the start date, say whether any shares are vested on day one for prior work, and decide whether vesting accelerates on an acquisition.
3. Roles, titles and time commitment
What each founder is actually responsible for, hours per week, and the date any part-time founder goes full-time. Vague commitment is the most common source of quiet resentment.
4. Decision rights and the tie-breaker
List the areas — product, hiring, spend above a threshold, fundraising, pricing — and name who decides each when you genuinely disagree. Equal ownership does not require equal authority on every question.
5. Intellectual property assignment
Everything each founder has built for the company, and everything built from now on, is assigned to the company. This is the clause investors check first and the one most likely to be missing.
6. Leaver provisions: good leaver, bad leaver
What happens to unvested and vested shares if someone resigns, is dismissed, becomes ill, or simply stops showing up. Define the categories now, because defining them during the event is impossible.
7. Buy-out and valuation method
How a departing founder's shares can be bought back and how the price is set — a named formula or an independent valuer beats "we'll agree a fair number", which is what people say before they litigate.
8. Confidentiality and non-compete
What is confidential and what a departing founder may do next. Keep it enforceable in your jurisdiction rather than maximally aggressive.
9. Money in, expenses and salaries
Who has put cash in and on what terms, what expenses can be claimed, and the trigger for founders starting to take salary. Write down the trigger, not an intention.
10. Dispute resolution and dissolution
The steps before anything legal: a stated cooling-off period, a named mediator, then formal options. Also say how the company is wound up and how remaining assets are divided.
11. Review triggers
Dates or events — a fundraise, a year in, a change in someone's commitment — where you revisit roles and the split on purpose, instead of one person having to raise it as a grievance.
How to actually get it written
1. 1. Answer the questions separately
Each founder writes their own answer to every clause above before you compare. Drafting together in one document quietly produces the most confident person's answers.
2. 2. Compare and argue where you differ
The gaps are the whole point. A clause you both wrote identically needs five minutes; one where you wrote opposite things needs an hour and probably a walk.
3. 3. Write the plain-English version
One document, short sentences, no legal language. If you can't state a clause plainly you haven't agreed it yet.
4. 4. Then get it made binding
A lawyer converts it into the instruments your jurisdiction needs — shareholders' agreement, articles, IP assignments, share subscription. This is fast and cheap when the decisions are already made, and slow and expensive when they aren't.
Do the separate-answers part properly
Step one is where this either works or doesn't. Sitting down together with a template tends to produce one person's document with the other person nodding, and neither of you will notice until it matters. Answering separately and comparing afterwards is the entire trick.
The two free games here are a faster version of the same idea: ten minutes on separate phones, private answers, a simultaneous reveal, and a report showing which of these clauses you are quietly disagreeing about. Play it the evening before you draft.
A note on advice
This is a checklist, not legal or tax advice, and it isn't jurisdiction-specific. Use it to arrive at a lawyer's office with the decisions already made — that is the part you can't outsource and the part that makes the legal work cheap.
Frequently asked
- Is a founders agreement legally binding?
- The plain-English document you write yourselves is evidence of intent but usually isn't the operative instrument. The binding pieces are typically a shareholders' agreement, the company's articles, and signed IP assignments. Draft the substance yourselves, then have them executed properly for your jurisdiction.
- Do we need a founders agreement before incorporating?
- You need the decisions before incorporating, because incorporation locks in a share structure. The signed documents can follow within weeks, but don't start building anything valuable without at least agreeing vesting and IP.
- What if we're friends and it feels unnecessary?
- Friendship is the reason to write it down, not the reason to skip it. The document exists for the version of you that is exhausted and disagreeing in eighteen months, not for the version signing it today.
- Can we use a free template?
- Yes, for the substance. Use a checklist like this one to make the decisions, then get jurisdiction-specific documents drawn up — a US template can be actively wrong in the UK, EU or Canada.
- What's the single most commonly missed clause?
- IP assignment, closely followed by a defined tie-breaker. Missing IP assignment can stall a funding round; a missing tie-breaker quietly stalls the company.