Founders Agreement CFO Horizon
Get Your Founders' Agreement
Let CFO Horizon Handle it.
While we call you, get some insights into what you are getting into
At CFO Horizon, we provide comprehensive accounting and compliance services designed to empower firms like yours to thrive and succeed.
What is a Founders' Agreement?
A founders’ agreement is an official contract or legal agreement signed by the company’s co-founders when starting a business. This agreement defines each founder’s tasks, rights and duties, responsibilities, ownership, liabilities, and investment share.
The goal of the founders’ agreement is to avoid business disputes that may occur between co-founders over time. This agreement has outlined the founders plan, requiring them to behave within the parameters and adhere to the obligatory terms.
Founders’ agreements also aid in dealing with unforeseeable events, such as the death or resignation of a co-founder, directly impacting the business’s or firm’s ongoing growth and smooth operation.
Benefits of a Founders' Agreement
01
Determining the Type of Business Entity
The founders’ agreement will clearly state the nature and type of company the co-founders should establish, establishing the right course to take.
02
Confidentiality
The founder’s agreement included a second confidentiality clause that required founders not to share the business’s secrets.
03
Outlined Business Plans
This agreement specifies the entity’s vision, mission, and the short-term and long-term goals that must be met.
04
Designating the Roles and Responsibilities
Co-founders will inevitably have overlapping roles and functions without an appropriate framework for the allocated tasks. As a result, it is critical to define the duties and responsibilities of the co-founders following their areas of expertise, such as marketing, operations, finance, and so on.
05
Structure of Ownership
The founder’s agreement will explicitly state the ownership structure of the co-founder’s initial contribution or the percentage of equity shares held by the co-founder in the case of a firm, thus eliminating any future issues between them.
06
Compensation Provisions
This agreement outlined the compensation plan that would be implemented if any of the co-founders broke the terms of the agreement. The percentage of remuneration to be paid to each co-founder will be listed here.
07
Decision Making
There will be an ideological dispute between co-founders at some point, and these conflicts must be resolved through the proper decision-making process. The founder’s agreement will outline the procedures followed during the decision-making process. If the voting mechanism is implemented, it should define the value of each founder’s vote and propose a solution in the event of a deadlock.
08
Expulsion of Co-founders
Any co-founder can be fired from the company if they engage in fraudulent actions such as misuse of cash, sexual harassment, or working for other organizations. This agreement establishes a correct system for dealing with these scenarios and determining appropriate monies to be returned to the ejected co-founder.
Critical Terms Used in a Founders' Agreement
Founders
This section identifies the co-founders names and distinct organizational roles and responsibilities.
Ownership
This section describes the business’s equity ownership structure and the proportion of ownership each co-founder holds.
Vesting
The vesting timeline for each co-founder’s equity ownership in the company is outlined in this section. Vesting is a strategy that assures co-founders receive their shares over time, often over four years, with a one-year cliff.
Management and Control
This section describes the company’s decision-making structure, including the method for making significant choices and the roles and duties of each co-founder in the decision-making process.
Intellectual Property
The founders’ agreement section handles intellectual property ownership and protection, including patents, trademarks, copyrights, and trade secrets.
Confidentiality and Non-Disclosure
This section describes each co-founder’s responsibility to maintain the privacy of the company’s proprietary information and trade secrets.
Termination and Exit
This section describes the situations that may lead to the termination of a co-founder from the firm and the process for departing the company, including the right of first refusal and buyout clauses.
Dispute Resolution
This section outlines the method for settling conflicts among the co-founders, which includes mediation and arbitration.
Documents Required For Founders' Agreement
(1) Address verification for all co-founders
(2) Proof of identity for all co-founders
(3) Witness identification is required
(4) A well-defined company goal
(5) The total amount of equity shares held by each co-founder
(6) The total percentage of each co-founder's shares
Procedure for Drafting a Founders' Agreement
The following steps are included in the method for drafting the founders’ agreement:
Step 1:
A draft of the founders’ agreement is developed, comprising all relevant fields, such as the company’s objectives, terms, and conditions to be followed by the co-founders.
Step 2:
Once the drafting process is finished, double-check that all mandatory elements have been included and that there are no unclear clauses.
Step 3:
Include any other information that must be included in the agreement.
Step 4:
With the ratification of the agreement, as mentioned above, all co-founders should acknowledge that the final draft has been scrutinized.
Step 5:
After all co-founders have agreed to the terms of the agreement, it should be notarized on non-judicial stamp paper.
Step 6:
After notarising the agreement, obtain the signatures of all co-founders.
Step 7:
Seek expert advice before agreeing to avoid problems.
How to Get Started with Founders' Agreement ?
Fill Form
Simply fill out the above form to get started.
Make Payment
No additional compliance in most cases
Our Expert Will Start the Process
Our expert will connect with you & advise on documents.
Why CFO Horizon?
Startup Friendly
10k Business Registration & Counting
Affordable & Transparent
No Hidden Fee
Secure online payment
On-Time Deliver
We value time and hence would never miss a deadline
150+ Experts
A massive team of experts is just a call away!
100% Confidentiality
We maintain a high level of confidentiality of client information & information security management.
Live Status
You can track your Status of services live, which brings clarity and reliability to our system.
Our 20 Years of Experience Says
Companies that focus more on their business and outsource the Financial liabilities to us are more successful than those who went DIY.
Let CFO Horizon do what we’re good at, and You do what you are good at!