Founders' Agreement Outline Template

Co-founder terms: roles, decision rights, commitment, equity split, vesting and cliff, IP assignment, leaver terms, transfers, disputes, tax elections

StartupsStandardCommon practice; US 83(b) and UK s431 examplesfounders agreement outlineUpdated Oct 29, 2026

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How to use: Use it when co-founders need to agree terms before incorporation or the first outside money. Each founder fills it alone first, then compare answers and settle the equity split and vesting. The main pitfall is leaving good and bad leaver terms undefined until someone leaves.

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Founders' Agreement Outline: [Company name]

An outline for co-founders to agree, in writing and early, the terms that most often break founding teams: roles and decision rights, time commitment, the equity split, vesting, assignment of intellectual property, confidentiality, what happens when a founder leaves, and how disputes are resolved. It is a discussion and term-capture format: the agreed points are then put into binding documents (shareholders' agreement, articles or bylaws, restricted stock or share subscription agreements, IP assignment and employment or service contracts) by a lawyer in the company's country. Replace every [bracketed] value and every row marked Example. The example is fictional. This is a documentation format, not legal or tax advice; check the current official text and a qualified professional.

Document control

Field	Value
Document ID	[FND-AGR-NNN]
Version	[0.1]
Status	[Draft / Agreed in principle / Superseded by signed documents]
Owner	[@founder-a]
Approvers	[@founder-a], [@founder-b]
Last updated	YYYY-MM-DD
Classification	Strictly confidential, founders and counsel
Company	[Legal name, country of incorporation, company number, or "to be incorporated"]
Counsel	[Law firm, or "not yet appointed"]

Revision history

Version	Date	Author	Change
0.1	YYYY-MM-DD	[@founder-a]	Example: First answers from both founders merged
0.2	YYYY-MM-DD	[@founder-b]	Example: Equity split agreed after second discussion

1. Parties and purpose

Founder	Role	Date joined	Contribution so far
[Founder A]	[CEO]	YYYY-MM-DD	[Idea, customer research, cash]
[Founder B]	[CTO]	YYYY-MM-DD	[Prototype code, design]

Purpose of the company: [one sentence].

2. Roles, responsibilities and decision rights

Area	Owner	Decides alone up to	Needs all founders
Product and engineering (Example)	Founder B	Roadmap within agreed budget	Change of product strategy
Sales, fundraising, finance (Example)	Founder A	Spend up to [amount]	New funding round, debt
Hiring (Example)	Area owner	Hires within the approved hiring plan	Any executive hire, firing a founder-level role

Deadlock: if the founders cannot agree on a decision that needs all of them, [the CEO decides after a 7-day cooling-off period / an agreed advisor mediates / the board decides once formed].

3. Time commitment and other activities

Founder	Commitment	From	Other activities disclosed
[Founder A]	[Full-time]	YYYY-MM-DD	[None]
[Founder B]	[Part-time until funding, then full-time]	YYYY-MM-DD	[Advisor to an unrelated company]

4. Equity split

Founder	Shares	Percentage	Reasons
Founder A (Example)	5,200,000	52%	Original idea, full-time from day one, leads fundraising
Founder B (Example)	4,800,000	48%	Built the prototype, full-time from funding
Total founder shares	10,000,000	100%

Share price paid by founders: [nominal value per share]. Option pool planned before the first priced round: [percentage]. See mba/mba-venture-finance-cap-table-card for dilution arithmetic.

5. Vesting

Term	Agreed value
Vesting start date	[YYYY-MM-DD, often the date full-time work started]
Total period	[48 months]
Cliff	[12 months, 25% vests at the cliff]
After the cliff	[Monthly in equal instalments]
Credit for past work	[Months credited, if any]
Acceleration on sale of the company	[None / single trigger: on sale / double trigger: on sale and termination without cause within [12] months]

Example: Founder B holds 4,800,000 shares vesting from 2026-09-01. Nothing vests before 2027-09-01, when 1,200,000 shares vest (25%); after that 100,000 shares vest each month. On 2028-03-01, 18 months in, 1,800,000 shares (37.5%) have vested and 3,000,000 remain unvested. All 4,800,000 have vested on 2030-09-01.

Tax elections: when founders receive shares that are subject to vesting or other restrictions, some countries offer an election that changes when and how the shares are taxed, with a short deadline. Two dated examples, checked 2026-10-30:

US: an election under Internal Revenue Code section 83(b) must be filed no later than 30 days after the date the property is transferred. The IRS publishes Form 15620 "Section 83(b) Election" (Rev. 4-2025) for this: https://www.irs.gov/pub/irs-pdf/f15620.pdf
UK: a joint election by employer and employee under section 431 of the Income Tax (Earnings and Pensions) Act 2003 for restricted securities must be made within 14 days of acquisition (HMRC Employment Related Securities Manual ERSM30450: https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm30450).

Ask a tax adviser whether an election applies and who files it.

6. Intellectual property

All IP created by a founder for the company, before or after incorporation, is assigned to the company: [yes / exceptions].
Prior inventions and code each founder keeps, and any licence granted to the company: [list].
Open-source and third-party code used in the product is tracked in [register].
Questions: Did any founder create relevant work while employed elsewhere, and does that employer's contract claim it? Does any university or grant funder have rights?

7. Confidentiality and restrictions

Topic	Intent
Confidentiality	[Company information stays confidential during and after involvement]
Non-solicitation of staff and customers	[Period, subject to local law]
Non-competition	[Only where lawful; counsel to confirm]

8. Compensation and expenses

Item	Agreed
Founder salaries	Example: None until funding; 90,000 USD each from January 2027 (see `startup/hiring-plan`)
Founder loans or cash invested	[Amount, documented as a loan or shares]
Expenses	[Approval and reimbursement rule]

9. When a founder leaves

Leaver type	Definition	Unvested shares	Vested shares
Good leaver	[Death, long illness, dismissal without cause, other agreed cases]	[Company may buy back at the lower of cost and fair value]	[Founder keeps, or company may buy back at fair value]
Bad leaver	[Resignation within [x] months, material breach, defined misconduct]	[Company may buy back at the lower of cost and fair value]	[Founder keeps / buy back at a discount, subject to local law]

Other leaving terms: return of company property, handover period, board seat and director resignation, transfer of domain names and accounts.

10. Share transfers and future rounds

Transfers by a founder need [consent of the other founders / board].
Right of first refusal for the company or other founders: [yes / no].
Drag-along and tag-along on a sale: [principles].
Founders' approach to raising: [instrument, target, timing; see startup/fundraising-tracker].

11. Disputes

Founders discuss within [7] days of a written notice.
If unresolved, mediation by [named person or body] within [30] days.
If still unresolved, [arbitration / courts of the country of incorporation].

12. Status and next steps

Next step	Owner	Due
Decide whether this outline is binding: [Not binding, intent only]	All founders	YYYY-MM-DD
Incorporate and issue founder shares with vesting	Counsel	YYYY-MM-DD
Sign IP assignment and service or employment agreements	Counsel	YYYY-MM-DD
File any tax election within its deadline	Each founder, with adviser	[Within 30 days in the US, 14 days in the UK, check others]

Signatures of founders (if signing): [Founder A, date], [Founder B, date].

Standard and licence note

Based on common startup practice for founder arrangements, with dated US and UK tax election examples from the IRS and HMRC pages cited. All wording and the example are original and fictional; no law firm form is reproduced. Laws on vesting, leaver terms, restrictive covenants and tax differ by country and change: check the current official text and ask a qualified lawyer and tax adviser. This is a documentation format, not legal or tax advice. Template licence: MIT.

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