What is a Pre-Incorporation Founder Agreement?
This Founder Agreement is designed for entrepreneurs who are working together to develop and validate a business idea in the earliest stages, before incorporating a company.
As you start investing meaningful time and resources on the joint project, it is important to reach a clear understanding as to what each co-founder will put in and get out of this joint effort to launch a viable business. This contract will allow you to do so.
How it works
1. Review sample document
2. Answer a few quick questions
3. Check for incoming LexKnights email
4. Review finalized contract
5. Follow instructions to E-Sign
Managing Early Break-Ups
Co-founders may collaborate for long periods before incorporating a company. Many collaborations break down before materializing in a business. What happens to the fruits of the collaboration then? Not dealing with this question can result in serious disputes down the line. Our contract ensures the parties reach an agreement as to how the work-product can be used after a break-up.
IP Assigment to the Future Startup
Intellectual property can account for the bulk of the value of high growth start-ups. It is therefore key to ensure that it is adequately managed and will be closely diligenced by potential buyers and investors. Once a company is incorporated, our contract provides for the start-up to hold clean ownership of the IP.
Roles, Capital and Ownership
Is everyone clear on what their role will be in the business as you establish your company and face clients and investors? Who will contribute initial capital to cover costs in the early days. And in light of these points, what will be a fair equity split among the co-founders in the future start-up? Our contract allows you to create & formalize alignment among the co-founders early to avoid gaps and conflicts later down the line.
Vesting, Resignation & Removals
Sometimes co-founder relationships don’t work out, even after there is a viable business in operation. Sometimes founders decide to leave, or a majority of the co-founders believe another should leave for the good of the business. Our contract provides clear rules for resignation and removal, and allows you to establish vesting restrictions to avoid departing co-founders from free-riding.
Establish some basic ground rules for decision making in the future company in advance. Our contract specifies voting rights in accordance with ownership and ensures co-founders will retain a board seat provided they have a minimum threshold. It also paves the way to agree key documents such as the shareholder & employment agreements, and requires inclusion of key provisions.