When embarking on a new business, it is all too easy to miss some essential simple legal documentation beyond the usual business incorporation documents. Many startups are cultivated by more than one founder hence formalizing the alliance among founders is key so as to create a professional and transparent relationship which is good for business.
Legal Relationship with Founder Advisors
A long lasting solid co-founder relationship comes from clearly identifying founder advisor roles. Such a relationship is enabled by the creation of a founders’ agreement which outlines the rights and duties that each founder has.
If the business has more than one founder, one needs to have some basic agreements which will protect the business in the long run.
Founders’ agreement document is made between the co-founders of a business and seek to address the relationships between the co-founders and the co-founders’ rights and responsibilities in the business.
Intellectual Property transfer document places any intellectual property that any of the founders bring to the table into the custody of the company.
It is crucial to indicate the role each founder will play in the business so as to avoid miscommunication, or a situation where one co-founder is more involved than the others.
Ownership and vesting is a very critical clause as it addresses equity ownership of the business among founders.
Mode of decision making is also an important clause and should state the types of decisions that will require consultation with, or approval by the other co-founders.
Tips for working with Founder Advisors
- Acquire advisors that are the right match for your business and invest some time to get to know them.
- Define the Founder Advisor Relationship
Address matters of founder responsibilities and state a clear path for exiting the relationship. This should be documented and committed to paper.
- Addressing Issues
Practice effective conflict resolution skills and know how to properly communicate with the founder advisors.