Founders Agreement

Founders Agreement: Agree Ownership and Roles Before You Build

A founders agreement is a contract between the founders of a new business. It records each founder's shareholding, how shares vest and whether there is a cliff, each founder's role, time commitment and contributions, which decisions need everyone's agreement, the transfer of intellectual property to the business, confidentiality, restrictions after leaving and what happens to a leaving founder's shares. Robot Lawyer drafts the agreement from your answers, for the law of the country or state you choose, and on the Verified plan a qualified legal professional checks it within 24 hours before you sign.

CONTENTS

What Is a Founders Agreement?

A founders agreement (also called a co-founder agreement or founders' agreement) sets out how co-founders will work together, usually from the very start of a company or project.

Agreeing ownership, roles and what happens if someone leaves while everyone is on good terms avoids costly disputes later, and gives investors confidence that the business owns its intellectual property.

When Should You Use One?

• Starting a company
  When two or more founders set up a new business.
• Before incorporation
  When founders work on a project before a company exists.
• Unequal contributions
  When founders contribute different amounts of money, time or IP.
• Vesting
  When founder shares should be earned over time.
• Before fundraising
  To show investors that roles, ownership and IP are clear.

What's Included in Your Agreement?

• The founders and the business
  Who the founders are and what the business does.
• Ownership
  Each founder's shareholding.
• Vesting and cliff
  Whether shares vest over time and any cliff.
• Roles and time
  Each founder's responsibilities and time commitment.
• Contributions and pay
  Money, assets or IP contributed, and any salary.
• Decisions
  Which decisions need every founder's agreement.
• Intellectual property
  Transfer of founders' work to the business.
• Confidentiality and restrictions
  Confidentiality, non-compete and non-solicitation.
• Leaving founders
  What happens to a leaving founder's shares.

How to Write a Founders Agreement

The hardest part of a founders agreement is the conversation, not the paperwork. Before you answer the questions, agree as a team:

• Who owns what
  Each founder's percentage, and whether it reflects past work, money, ideas or future commitment.
• How shares are earned
  Whether shares vest over time, often over four years with a one-year cliff, and when vesting starts.
• Roles and time
  Who leads which area, whether each founder works full time, and what happens if that changes.
• Money in and out
  Any cash or assets contributed, whether founders are paid, and when salaries start.
• Big decisions
  Which decisions need every founder to agree, such as issuing shares, taking on debt or selling the business.
• Leaving
  What happens to a leaving founder's shares, and whether that depends on why they leave.
• Intellectual property
  Confirmation that everything founders create for the business belongs to it.

Good Leavers and Bad Leavers

Most founders agreements treat a founder who leaves differently depending on why they leave, so that a founder who walks away early does not keep a large stake they have not earned.

Under your agreement, a founder who leaves keeps their vested shares and the other founders can buy their unvested shares. A bad leaver, meaning a founder dismissed for misconduct or in serious breach of the agreement, must sell all their shares. In both cases the price is the lower of what they paid and market value, and the other founders have three months to buy. You can describe your own terms instead, and they replace these.

Agreeing this at the start, while everyone is getting on, is far easier than negotiating it when a founder is leaving. As the business grows and takes on investors, a Shareholder Agreement usually builds on these terms.

How It Works on Robot Lawyer

1. Answer the questions
   Tell us about the founders, shares, vesting, roles and decisions.
2. Generate your agreement
   We draft a clear, balanced agreement from your answers.
3. Get it verified
   On the Verified plan, a qualified legal professional checks your agreement within 24 hours and makes amendments where needed. The Essentials plan does not include this check. See how our documents are verified.
4. Sign and build
   Download it, sign it as a deed with your co-founders, each in front of a witness, and each keep a copy.

What Your Document Looks Like

Your agreement is a numbered contract: the founders and background, definitions, the business, ownership, vesting, leavers, roles and contributions, intellectual property, decisions, confidentiality and restrictions, disputes and general terms, with signature sections and a schedule of the founders and their holdings. Here is an extract from a sample agreement we generated:

7. Vesting

7.1 All Shares allocated to Amelia Whitcombe, Rohan Mehta and Sophie Ellery are subject to reverse vesting over 48 months from 2 November 2026, subject to continuous service. Vesting determines which Shares remain exposed to the unvested-share transfer provisions; it does not postpone their issue.

7.2 No Shares vest before the 12-month cliff on 2 November 2027, when 25% vest. Thereafter, 1/48 of each founder's original allocation vests on each monthly anniversary for 36 months, with full vesting on 2 November 2030. This equals 1,000 shares per subsequent month for Amelia and Rohan and 500 for Sophie. No automatic acceleration applies.

7.3 Vested Shares are calculated cumulatively and rounded down to the nearest whole Share, with all remaining Shares vesting on the final vesting date. The same calculation applies to Shares not yet issued.

How It Works in Different Countries

• UK
  A founders agreement sits alongside the company's articles of association, which may need to be updated to match it. Restrictions after a founder leaves must be no wider than reasonably needed to protect the business.
• United States
  Founders often file an 83(b) election with the IRS within 30 days of receiving shares that vest. Some states, including California, do not enforce non-compete restrictions.

These notes are general. Check the current rules where the business is set up.

Founders Agreement FAQs

When should founders sign an agreement?

As early as possible, ideally before significant work is done or the company is set up.

What is vesting?

Founders earn their shares over time. If a founder leaves early, their unvested shares can be bought back.

What is a cliff?

A period, usually 12 months, before any shares vest. If a founder leaves before it ends, none of their shares have vested.

Who owns the IP the founders create?

The business. Your agreement transfers to it the intellectual property founders create for it.

Do we need a founders agreement if we have a shareholder agreement?

A shareholder agreement often covers similar ground once a company has investors. Many startups use a founders agreement at the start and replace or add to it with a shareholder agreement when they raise money.

How should founders split equity?

There is no single rule. Founders often weigh past work, ideas, money contributed, future roles and time commitment. Vesting protects everyone if the split later looks unfair because someone leaves early.

Is a founders agreement legally binding?

Yes, once it is signed. Your agreement is executed as a deed, with each founder's signature witnessed.

Can we sign before the company is set up?

Yes. Your agreement can be signed before incorporation and sets out how the founders' shares are issued once the company exists.

Can we change the agreement later?

Yes. Changes need the written agreement of every founder who still holds shares, so revisit it as the business grows or before you raise investment.

Can I use this agreement outside the UK?

Yes. Your agreement is drafted under the law of the country or state you choose. Our lawyers are qualified in England and Wales and, on the Verified plan, check documents for good practice, clear formatting and the law of England and Wales. They are not qualified in other countries' law, so if your agreement is governed by another country's law, we recommend having a local lawyer check it too.

Create a Founders Agreement

Agree ownership, roles and the future with your co-founders. You can start with a 7-day free trial. See our pricing for the plans. Related documents: Co-Founder Agreement, Shareholder Agreement and Joint Venture Agreement.