Founders Agreement service

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Founders Agreement service
What is a Founders Agreement

What is a Founders Agreement?

This is a legal contract signed by the founder(s) of a company. That includes the participants, how much they donated, director duties, equity vesting schedule and the process if someone leaves.

A brilliant company idea demands a lot of hard work to get off the ground. First, you need to consider a business strategy and plan, start-up cash, and business structure with your co-founders.

Though not essential, as a legally binding contract, it should be formed early in the lifecycle before moving further forward.

What should be included in a
Founder’s Agreement?

Names of founders and company

The first is necessary and must therefore be included. First and foremost, write down the names of everyone involved. Also, make sure your company’s name is included, even if it may change at a later date.

Ownership structure

This is where you figure out how much each member of the company owns. This includes you and your co-founders. Changes in the company could make this number different. If your company is an LLC, you should also figure out how much each member owns in the company. That means you need to figure out if each person is just an owner financially or if they also play a role in running the business.

Initial capital and additional contributions

To become a founder, every start-up’s founders would have contributed something. For example, cash, property, services provided, a financial pledge, a combination of the above.

If one of your co-founders makes a non-cash contribution, you must all calculate the monetary value of that item and note it in the document. It would be best if you also determined whether members would continue to contribute capital throughout the company’s life or only during the initial investment.

Expenses and budget

This section covers setting out your spending and budget. You may not even know the exact figures at this stage, but how you will manage any budgets in the future.

Who will approve the budget as a whole, or can specific individuals approve it? How about expenses or future funding rounds? They should all be stated clearly here.

Management and legal decision-making

Who gets to vote on company decisions? Some businesses grant voting rights based on percentage interests, while others grant voting rights just to specific groups. In addition, a supermajority vote, a veto right, or even administrative rights without a vote can be given.

Equity compensation and vesting

Founders typically possess a large percentage of the company. After the original shares are established and awarded, a later founder may be given share options instead of shares. Specify whether the founder agreement should award shares or options.

You can set up a share vesting schedule to distribute shares or options over time or at specified milestones. This prohibits co-founders from departing the company with a substantial stake, leaving future investors with nothing.

What should be included in a Founder’s Agreement

Why Choose Us

When someone starts a business, they are most likely to enlist the help of friends, family, or co-workers to form a team.

dedicated accountant for all our Sole Trader

Forming a Corporation.

Your agreement specifies the entity’s vision and mission and defines long-term and short-term goals.

Is being a Limited Company best for my business

Appropriate structure

We can help you decide on the best business structure for your needs and help you maximise your tax benefits.

Seed Legals Founders Service Agreement service

Our Legal partner, SeedLegals, quick and easy founders agreement template will create agreements that protect you and your co-founders and distribute equity from the start.

Investors will be looking for this as part of their due diligence, so if you and your co-founders do not have a signed Founders Service Agreement in place, now’s the time to do it.

The Founder’s Pledge is designed to protect the founders and the company if things go wrong.

Founders Service Agreement service
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FAQ ‘s

The difference between a Founders Pledge and Founders Service Agreement

The Founder’s Pledge is a lighter version of the Founders Service Agreement which is used by companies at the idea stage, then migrate to a Founders Service Agreement as you begin your first funding round.

I’m a solo entrepreneur, do I need a Founders Service Agreement?

Yes! The Founders Service Agreement is there to protect the company as well as the founding team – and investors will expect to see the warranties, IP assignment, and confidentiality clauses present in the Founders Service Agreement.

What should a Founders Agreement include?

Here is a list of what should be included:

  • Names of Co-Founders and the Business and rules.
  • Company Goals.
  • Each owner’s roles and responsibilities.
  • Breakdown of equity.
  • Vesting Schedule.
  • Intellectual Property.
  • An exit clause.

What is the importance of Founder’s Agreement?

It helps to prevent and resolve founder disagreements. It explicitly defines the founders’ duties and responsibilities and develops a robust management and dispute resolution mechanism.

How long does it take to write is a Founder’s Agreement?

The entire process may take around three to four working days and review the document in detail with your co-founders.

How do you calculate Founders equity?

Equivalent ownership equity splits are calculated by dividing 100% of the equity shares by the number of co-founders. If there are five co-founders, each gets 20% equity.

Do all Founders need to sign a Founders Service Agreement?

Yes. Founders Service Agreements are individual documents and each member of the founding team will need to sign one.