How To Structure A Co-Founder Agreement

Most co-founder disputes are not about bad faith. They are about two people who never wrote down what they had agreed and who remember it differently once money is involved.

Equity, and why it should not be equal by default

An even split is chosen because it avoids a difficult conversation on day one. It is sometimes right. It is often a decision to defer the argument to a point where it cannot be resolved without damage.

Discuss the inputs openly: who is full-time and who is not, who contributed capital, who brought existing intellectual property, who is taking a salary and who is not. Then decide, and write down the reasoning as well as the numbers. The reasoning is what lets you revisit it honestly later.

Vesting for everyone

All founder equity should vest, including yours. Four years with a one-year cliff is the convention. Without it, a founder who leaves early keeps a permanent stake in work done entirely by the people who remained.

Roles and final say

Write down who decides what. Not an organizational chart — a list of decisions and who holds the final call on each: hiring, pricing, product direction, fundraising, spending above a threshold.

Two founders with equal shares and no tie-breaker have designed a deadlock. Agree in advance how one gets broken.

Departure

Specify what happens if someone leaves: how unvested shares are treated, whether the company can buy back vested shares and at what valuation, and what notice is required.

Include the awkward case — a founder who neither leaves nor contributes. Define what full-time commitment means and what happens when it stops.

Intellectual property

Every founder assigns their relevant work to the company in writing. This is not optional and it is the item most likely to hold up a future financing.

Put it in front of a lawyer

A founders' agreement is not expensive relative to the dispute it prevents. Have separate counsel if the terms are not symmetrical.

This is general information, not legal advice. Speak to a qualified New York attorney before acting on any of it.