Co-founder agreement

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What's a co-founder agreement, and when do you need it?

This is a straightforward agreement for two or more individual co-founders to sign at the start of their collaborative efforts.

It's not a standard shareholder agreement. All other shareholders, including any future collaborators to whom you want to extend the title 'co-founder', should sign a different agreement when shares are issued outside of this very initial arrangement.

It's not suitable for collaborations between businesses, which would require a joint venture or commercial collaboration agreement.

If a business and an individual are collaborating, this relationship should be documented with a contract for services, where the individual is engaged by the business.

What else might you need?

Co-founder agreements sometimes cover vesting arrangements, setting out what will happen with the ownership stakes of each cofounder, particularly if one of them should leave early on in the company's history. Our guide to including vesting arrangements in your co-founder (or early shareholder) agreement sets out the benefits and ramifications of vesting arrangements.

Setting out your intentions in a co-founder agreement is highly recommended. Here you can include what will happen to intellectual property that you may both contribute, how you will handle day-to-day workload and split up responsibilities, whether either of you will take a salary and if so, at what level, etc. One of the biggest causes of startups not getting off the ground is co-founders falling out over issues such as these. Setting them out here and now ensures that there is far less ambiguity about everyone's intentions, right from the start

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