When a company is founded by people who trust each other, a written agreement between them can feel unnecessary — even a little cold. In our experience the opposite is true. A founders' agreement is most valuable precisely because it is written while everyone is still aligned and optimistic. It records what you all already believe to be fair, so that a future disagreement is resolved by a document rather than by memory or emotion.
Here are the questions a good founders' agreement tends to answer.
Who owns what — and does it vest?
The headline term is the equity split between founders. Just as important is vesting: the idea that a founder earns their shares over time rather than owning all of them from day one. Without vesting, a founder who leaves in month three can walk away with a large slice of the company, leaving those who stay to build value for someone who is gone. A vesting schedule — often over several years, sometimes with an initial "cliff" — keeps ownership tied to contribution.
In practice. Picture three friends who start a company and split equity equally: a third each, all vested immediately. Six months in, one of them realises the startup life is not for them and takes a full-time job elsewhere. They keep their third of the company and disappear. The two who remain now do all the work, raise all the money, and grow the value — a third of which belongs to someone who left. A four-year vesting schedule with a one-year cliff would have returned most of those shares to the company.
What is each founder actually responsible for?
Roles blur quickly in a young company, but the agreement should still record who leads what, who holds which title, and how much time each founder is committing. This matters most when one founder is full-time and another is not — an imbalance that causes more founder disputes than almost anything else.
Who decides what?
Some decisions should need more than a simple majority — taking on debt, issuing new shares, selling the company, changing the business fundamentally. Setting out which decisions are "reserved" and what level of agreement they need prevents a situation where one founder commits the company to something the others never signed up for.
Does the company own its own IP?
This clause is easy to miss and expensive to fix. Everything the founders create for the business — code, designs, brand, content — should be assigned to the company, not held personally by the individual who made it. Investors and acquirers will check for this, and a gap here can stall a funding round.
In practice. A technical founder builds the entire product in the months before incorporation, on a personal laptop, in their own name. The company is later set up, grows, and attracts an investor — whose lawyers ask a simple question during due diligence: does the company actually own its core technology? Because the code was never formally assigned to the company, the answer is unclear, and the round stalls while it is fixed. A short IP-assignment clause signed at the start would have made this a non-issue.
What happens when a founder leaves?
Not every founder stays for the whole journey. The agreement should address how a departing founder's shares are treated, whether the company or the others can buy them back, and on what terms. Distinguishing between someone who leaves on good terms and someone who is removed for cause is a normal and sensible thing to plan for.
How are deadlocks broken?
Two founders with equal shares can reach a genuine impasse. A short mechanism for breaking deadlock — a casting vote on defined matters, a mediation step, or a structured buy-out route — keeps a disagreement from freezing the whole company.
How are disputes resolved?
Finally, the agreement should say how any dispute between founders will be handled and under which jurisdiction — so that if things do go wrong, there is a clear, agreed path rather than an argument about the process itself.
A founders' agreement does not need to be long to be useful, but it does need to be specific to your company and your relationships. If you are setting one up, it is worth having it drafted around your actual plans rather than adapted from a generic template found online — the value is entirely in the details that are true for you.
