A Founders Shareholder Agreement is a legally binding contract that outlines the rights, responsibilities, and ownership stakes of each founder in a newly formed company. This document serves as the foundational framework for the company’s governance and ensures that all founders are on the same page regarding key aspects of their venture.
Key Considerations for a Professional Template
Clarity and Conciseness
The agreement should be drafted in clear, concise, and unambiguous language. Avoid legal jargon whenever possible, and use plain English to ensure all founders understand their rights and obligations.
Comprehensive Coverage
Free Founders Agreement Template For Your Startup
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The agreement should address all essential aspects of the founders’ relationship, including:
Ownership Structure: Clearly define each founder’s initial ownership stake in the company, including the type of shares issued (e.g., common stock, preferred stock).
Vesting and Cliff: Establish a vesting schedule for founder shares, typically over a period of several years with a “cliff” period (e.g., one year) during which no shares vest. This incentivizes long-term commitment from founders.
Equity Grants: Outline any equity grants to employees, advisors, or other stakeholders, including their vesting terms and any relevant restrictions.
Intellectual Property: Define ownership and usage rights for intellectual property created by founders, including inventions, trademarks, and copyrights.
Decision-Making: Establish the process for making major company decisions, such as funding rounds, hiring key personnel, and strategic partnerships. This may involve voting rights, board representation, and majority/supermajority requirements.
Dispute Resolution: Include provisions for resolving disputes among founders, such as mediation or arbitration, to avoid costly and time-consuming litigation.
Exit Strategy: Address potential exit scenarios, such as an initial public offering (IPO), merger, or acquisition. This may include provisions for the distribution of proceeds among founders and other stakeholders.
Confidentiality and Non-Competition: Include clauses that protect the company’s confidential information and prohibit founders from engaging in competing businesses during and after their employment.
Design Elements for Professionalism and Trust
Professional Formatting
Free Founders Agreement Template For Your Startup
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Use a clean and modern font: Times New Roman, Arial, or Calibri are all suitable choices.
Employ consistent formatting: Use headings, subheadings, and bullet points to improve readability.
Maintain consistent spacing: Use appropriate line spacing and margins to ensure the document is easy to read.
Utilize professional page numbering: Include page numbers in the footer of each page.
Clear and Concise Language
Avoid legal jargon: Use plain English to ensure all founders understand the agreement.
Define key terms: Clearly define any technical or legal terms that may be unfamiliar to the founders.
Use short sentences and paragraphs: This improves readability and makes the agreement easier to understand.
Professional Presentation
Use high-quality paper: If printing a hard copy, use high-quality paper to create a professional impression.
Bind the document: Consider binding the agreement using a professional method, such as a three-ring binder or a hardbound cover.
Obtain professional legal advice: It is essential to consult with an experienced attorney to ensure the agreement is legally sound and protects the interests of all founders.
Conclusion
A well-drafted Founders Shareholder Agreement is crucial for the success of any startup. By carefully considering the key provisions outlined above and adhering to professional design principles, founders can create a document that provides a solid foundation for their business and protects their interests.
This agreement should be reviewed and updated regularly as the company evolves and new circumstances arise. By proactively addressing potential issues and ensuring that all founders are in agreement, this document can help to prevent costly disputes and ensure the long-term success of the venture.
