How to Prepare a Founders Agreement

Hi guys. Sorry for the delay. We were working hard on the beta version of Staply that we plan to launch really, really soon. But luckily now i have some time to write the next part of our DIY guide of legal basics for startups. In this article I will describe the first 2 sections of the Founders Agreement, Header and Recitals.

Also, as i promised, I will share our own Founders Agreement signed by Greg and me before we started working on Staply. We are sharing this agreement with you as a public domain work, so you can use it completely for free.

You can download the agreement here.

 Header section

Ok, let’s start. The first thing you typically see in the agreement is the section where parties are described. It starts with

“This Founders Agreement (“Agreement”)”

I’ve inserted brackets to shorten the title of the agreement. That will come in handy when i will refer to it. It is not an obligation, but if i don’t shorten the title, i’ll need to put the full title every time when I need to mention that certain terms and conditions are related to this agreement.

“… is entered into March 03, 2014…”

This is the date, when we started to work on Staply. It’s very important to sign this agreement before any operations or activities are started. I’ll describe it in more details in the intellectual property section

“… by and among Full Name #1 (ID #____________ issued _______ ) and Full Name #2 (ID #____________ issued ___________)(each individually a “Founder” and collectively the “Founders”).”

Greg and me are the Founders. That is why we sign it between only us two. If you have more than 2 founders, make sure to include all of them in this section. Please do not forget to put ID details of each of the founders. Also, same as in the title, I’ve put additional brackets to shorten full names of the founders.

 Recitals

This section is just like a preamble to the agreement, which states intentions of the parties of the agreement. It is not an obligatory section in the agreement. I recommend to describe each intention in the Agreement section in more details. If you don’t mention something here, it’s fine as long as it’s mentioned in the Agreement section.

“WHEREAS, The Founders decided to start working on the project with the name “Staply” (“Staply”) on the date of execution of the Agreement…”

Here we described that we together decided to start working on Staply.

“WHEREAS, The Founders agree, that Dmitry will be a Chief Executive Officer (CEO) and Grigorii will be a Chief Operating Officer (COO) in the Staply.”

Here we describe our intentions towards the roles designation. Specific details I’ve included in the Agreement section.

“WHEREAS, The Founders agree to create a legal entity in USA state Delaware if at least one of the Founders decides to do so.”

Here we say that the legal entity is to be opened when one of the Founders wishes to do so. I was thinking about other conditions, when the legal entity can be or need to be opened, for example by binding it to the event, when we find a VC or angel investor. But it’s quite difficult to describe these conditions. Since we trust each other we decided to make it clear and simple. If any of us decides to create a legal entity, we will do that.

“WHEREAS, The Founders agree to sign Shareholders and Vesting agreement within 1(one) month after execution of the present Agreement.“

By using this phrase, I stated our intention to sign an additional agreement. I agreed with Greg, that we’ll put terms and conditions regarding vesting and shares to the separate Shareholders and Vesting agreement.

 Next Article

This is it for now, since I don’t want to make huge unreadable articles. In the next part i will start describing the Agreement section. I’ll try to publish it in few days.

Feel free to comment or to give feedback on our Subreddit.

 
42
Kudos
 
42
Kudos

Now read this

Avoiding legal pain in startups

We are continuing to describe how to make a proper Founders agreement using, as an example, agreement that we’ve prepared and signed in Staply. If you just joined us, this is a series of articles for startup founders, who wish to... Continue →