The Founder Playbook · Legal & Visas
The Founder Agreements You Need Before You Need Them
The best time to agree on what happens if a co-founder leaves is before anyone is thinking about leaving.
Key takeaways
- Put the founder agreement in writing even if you have been friends or colleagues for years – verbal understandings fall apart under real pressure.
- Spell out equity split, roles, decision rights and what happens if someone leaves, ideally before you incorporate.
- Every founder, employee and contractor should sign an IP assignment agreement on day one, not after they have built something valuable.
- A vesting schedule with a cliff is itself a founder agreement – it answers the "what if someone leaves" question before it becomes a crisis.
- Revisit the agreement at major milestones, like a priced round or a co-founder departure, instead of treating it as a one-time document.
The agreements founders skip are almost always the ones that only matter when something has already gone wrong – which is exactly why they are worth doing early, while everyone still agrees on everything. This is general information, not legal advice for your specific situation.
The core agreements
- A founders’ agreement covering equity split, roles, decision-making authority and vesting.
- A Confidential Information and Invention Assignment Agreement (sometimes called a PIIA) for every founder, employee and key contractor.
- A basic governance framework once you incorporate – bylaws and a clear process for what requires board or shareholder consent.
- Side letters for any special terms attached to early SAFEs or convertible notes, so nothing is only remembered verbally.
What separates a good agreement from a vague one
A vague founders’ agreement says everyone will split equity "fairly" and figure out roles "as we go." A good one names what happens when a founder leaves – whether they are a "good leaver" who stays through a transition or a "bad leaver" who walks away abruptly – and what happens to their vested and unvested shares in each case. It addresses who owns IP created before the company was even incorporated, so that a side project one founder started six months earlier does not become a dispute later. And it is specific about which decisions need unanimous founder consent, which need a simple majority, and how a genuine deadlock between co-founders gets resolved.
Two clauses founders tend to skip
- A right of first refusal, giving the company and remaining founders the option to buy back a departing founder’s vested shares before they can be sold to an outside party.
- A non-solicit covering customers and employees for a defined period after departure – far more commonly enforceable than a broad non-compete, and clearer for everyone about what is and is not off-limits.
Non-competes specifically are worth a second look with counsel: their enforceability varies a lot by state – California, for instance, voids most employee and founder non-competes outright – so an agreement that assumes a hire can never work for a competitor may not hold up at all, and you should not rely on one being your primary protection. Lean on the invention assignment agreement and the non-solicit instead – confidentiality and a restriction on poaching customers or teammates travel across state lines far better than a broad non-compete does.
Do it before there is money or conflict on the table
These conversations are cheapest and easiest to have before there is anything real to fight over. Once the company has revenue, a term sheet, or a co-founder who wants out, incentives change and the same conversation gets a lot harder to have calmly. Founders who put the agreements in place early are not being pessimistic about their relationship – they are making sure a disagreement, when it eventually happens, stays a conversation instead of becoming a legal fight.
The agreement you do not think you need is usually the one that keeps a disagreement from turning into a lawsuit.