When you start a company it’s easy to get caught up in the excitement and hustle… and to forget about one of the most important things you need to do after you register your company: sign a founders agreement.
It’s essential to get a founders agreement in place as soon as you can to protect your company and outline the roles and obligations of each founder. In this article, we’ll cover what a founders agreement is, why you need one and what terms they include.
A founders agreement is a legally binding document that defines the relationship between founders and the company. It establishes the framework for how your business will run and how decisions will be made. It should also include clauses that protect the company’s IP and confidential information.
Important details you’ll find in a founders agreement include:
There are three ways to sign founder agreements:
There are two types of founders agreements:
The founders pledge is essentially a ‘lightweight’ version of the founders service agreement.
Founders agreements formalise the relationship between you and the company you have founded and make it clear what rights and obligations you have to your company - and what rights and obligations your company has to you. They map out how the company is run and what actions you can take if a co-founder isn’t acting in the company’s best interests.
A founders agreement helps you:
Having a founders agreement in place shows that you're a well-organised business and prepared for challenges that may lie ahead. It also provides a sense of security and stability for the founding team, which can be helpful in the early stages of a startup.
If you’re raising startup funding, investors will expect you to have a founders agreement. They’ll usually want to see your signed founders agreement as part of their due diligence.
It’s a good idea to get a founders agreement in place as soon as you can after you register your company.
Below we’ve listed the basic terms a founders agreement usually includes. The specifics will vary depending on your needs and circumstances, and your agreement should be tailored to fit those specific needs.
Remember that a founders pledge and a founders service agreement will include slightly different terms. A founders pledge will be less detailed and won’t include clauses about salary.
You can get your lawyer to draft a founders agreement for you. If your company is in the UK or France, there’s a faster solution that won’t cost you anything. You can create a high-quality founders agreement for free and in a matter of minutes on SeedLegals. All you need to do is:
Want to create all the legal documents you need for your startup at a fraction of the cost compared to lawyers? Explore how SeedLegals can help.