Founder Agreement Template with Vesting (2025)

A comprehensive founder agreement template for startup co-founders. This template covers equity splits, vesting schedules (4-year vesting with 1-year cliff), intellectual property assignment, roles and responsibilities, decision-making authority, and departure terms.

📋 Quick Facts

Aspect	Details
Type	Founder Agreement with Restricted Stock Purchase Agreement
Vesting Schedule	4 years with 1-year cliff (industry standard)
Format	Word document and PDF
Customization Time	2-3 hours
Legal Review	Strongly recommended
When to Sign	Before incorporating or immediately after
Parties	All co-founders

🎯 What This Template Includes

This founder agreement template covers all essential terms for co-founder relationships:

✅ Equity Allocation

Initial equity splits among founders
Vesting schedule (4-year with 1-year cliff)
Acceleration provisions (single-trigger or double-trigger)

✅ Intellectual Property Assignment

All pre-existing IP and future IP belongs to the company
Prior inventions disclosure
Work-for-hire provisions

✅ Roles and Responsibilities

Titles and roles for each founder
Time commitment expectations
Salary and compensation (if any)

✅ Decision-Making Authority

Voting rights and board representation
Major decisions requiring unanimous consent
Day-to-day operational authority

✅ Confidentiality and Non-Compete

Protection of company confidential information
Non-compete provisions (during employment and post-departure)
Non-solicitation of employees and customers

✅ Departure and Termination

Voluntary departure terms
Involuntary termination (for cause vs. without cause)
Repurchase rights for unvested shares
Right of first refusal for vested shares

✅ Dispute Resolution

Mediation and arbitration provisions
Governing law and jurisdiction

📊 Why You Need a Founder Agreement

Protects All Founders

A founder agreement clarifies expectations and protects everyone involved:

Equity clarity: Who owns what, and when do they fully own it?
IP ownership: Ensures the company (not individuals) owns all intellectual property
Role clarity: Defines each founder's responsibilities and authority
Exit terms: What happens if a founder leaves?

Required by Investors

Investors will not fund your startup without a founder agreement. During due diligence, investors check for:

✅ Vesting schedules (protects against founders who leave early)
✅ IP assignment (ensures the company owns its core assets)
✅ Clear equity ownership (no disputes or uncertainty)

Without these protections, investors see too much risk.

Prevents Co-Founder Disputes

50% of startups fail due to co-founder conflict. A founder agreement prevents disputes by:

Setting clear expectations upfront
Defining decision-making authority
Establishing fair departure terms
Providing dispute resolution mechanisms

🔄 Standard Vesting Structure

What is Vesting?

Vesting means earning your equity over time rather than receiving it all upfront. If a founder leaves before their shares fully vest, the company can repurchase the unvested shares.

Standard 4-Year Vesting with 1-Year Cliff

Time Period	Vesting	Cumulative Ownership	What Happens if Founder Leaves
0-12 months	0% (cliff period)	0%	Founder gets nothing (all shares repurchased)
12 months	25% vests immediately (cliff release)	25%	Founder keeps 25%, company repurchases 75%
13-48 months	Monthly vesting (~2.08% per month)	25% → 100%	Founder keeps vested shares, company repurchases unvested
After 48 months	100% fully vested	100%	Founder keeps all shares

Why a 1-Year Cliff?

The cliff protects the company and remaining founders from someone who:

Commits to the startup but leaves within the first year
Doesn't contribute meaningfully but walks away with equity

If a founder leaves before the 1-year cliff, they get zero equity. This is fair because building a startup requires long-term commitment.

Acceleration Provisions

Single-Trigger Acceleration:

Vesting accelerates upon a specific event (e.g., acquisition, IPO)
Example: 100% of unvested shares vest immediately if the company is acquired
Investors dislike single-trigger acceleration (founders could leave immediately after acquisition)

Double-Trigger Acceleration:

Requires TWO events: (1) acquisition/change of control AND (2) termination without cause
Example: If the company is acquired and you're fired within 12 months, 50-100% of unvested shares vest immediately
More common and acceptable to investors

No Acceleration:

Vesting continues on the original schedule regardless of acquisition or IPO
Most investor-friendly (ensures founder retention post-acquisition)

📝 Founder Agreement Template

Instructions for Customization

Replace all [BRACKETED TEXT] with your specific information
List all co-founders with their equity percentages
Specify vesting schedule (4-year with 1-year cliff is standard)
Define roles, responsibilities, and time commitments
List any pre-existing IP that founders are contributing
Choose acceleration provisions (if any)
Have all founders and the company sign
Attach Exhibit A: Restricted Stock Purchase Agreement for each founder
File 83(b) elections within 30 days of grant (critical!)
Have your attorney review before signing

FOUNDER AGREEMENT

This Founder Agreement (this "Agreement") is entered into as of [INSERT DATE] (the "Effective Date"), by and among:

[COMPANY LEGAL NAME], a [STATE] [ENTITY TYPE] (the "Company"),

and the following individuals (each, a "Founder" and collectively, the "Founders"):

Founder Name	Initial Equity %	Number of Shares	Role/Title
[FOUNDER 1 NAME]	[X]%	[X shares]	[CEO / CTO / etc.]
[FOUNDER 2 NAME]	[X]%	[X shares]	[CEO / CTO / etc.]
[FOUNDER 3 NAME]	[X]%	[X shares]	[CEO / CTO / etc.]

Total Shares Outstanding: [X shares] common stock

RECITALS

WHEREAS, the Founders have agreed to establish and operate the Company for the purpose of [DESCRIBE BUSINESS PURPOSE];

WHEREAS, the Founders desire to set forth their respective rights, obligations, and expectations regarding equity ownership, intellectual property, roles and responsibilities, and other matters relating to the Company;

WHEREAS, the Founders recognize that long-term commitment is essential to the Company's success and agree that founder equity should vest over time;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. EQUITY OWNERSHIP AND VESTING

1.1 Initial Equity Allocation. The Founders shall receive the equity ownership percentages set forth in the table above through the purchase of restricted common stock, subject to the terms of this Agreement and the Restricted Stock Purchase Agreement attached as Exhibit A.

1.2 Purchase Price. Each Founder shall purchase their shares at a price of $[0.0001 - 0.001] per share (par value), for a total purchase price of $[X] per Founder, payable in cash or services rendered.

1.3 Vesting Schedule. Each Founder's shares shall vest according to the following schedule:

(a) Vesting Period: 4 years from the Vesting Commencement Date (defined below)

(b) Cliff: 1 year (no shares vest until the 1-year anniversary of the Vesting Commencement Date)

(c) Cliff Vesting: On the 1-year anniversary, 25% of the Founder's shares shall vest immediately

(d) Monthly Vesting: After the cliff, the remaining shares shall vest in equal monthly installments over the next 36 months (approximately 2.08% per month)

(e) Vesting Commencement Date: [INSERT DATE, typically the date the Founder begins working full-time or the date of incorporation]

Example:

Founder receives 1,000,000 shares
After 12 months: 250,000 shares vest (25%)
Months 13-48: 20,833 shares vest per month
After 48 months: All 1,000,000 shares are fully vested

1.4 Acceleration of Vesting.

[OPTION 1: No Acceleration] Vesting shall continue according to the schedule above regardless of any change of control, acquisition, merger, or other corporate transaction.

[OPTION 2: Double-Trigger Acceleration] If (i) the Company experiences a Change of Control (as defined below), and (ii) the Founder's service is terminated by the Company or the acquiring entity without Cause (as defined below) within 12 months following the Change of Control, then [50% / 100%] of the Founder's then-unvested shares shall immediately vest as of the termination date.

"Change of Control" means (a) a merger, consolidation, or sale of all or substantially all of the Company's assets, (b) a sale of more than 50% of the Company's outstanding voting securities, or (c) a change in the majority of the Company's Board of Directors.

1.5 Repurchase Right. The Company shall have the right to repurchase any unvested shares held by a Founder upon the termination of the Founder's service to the Company, at the original purchase price paid by the Founder, as set forth in the Restricted Stock Purchase Agreement (Exhibit A).

1.6 83(b) Election. Each Founder acknowledges that they have been advised by the Company to consult with a tax advisor regarding the advisability of filing an 83(b) election with the Internal Revenue Service within 30 days of the date of grant. Failure to file an 83(b) election may result in significant adverse tax consequences.

2. INTELLECTUAL PROPERTY ASSIGNMENT

2.1 Assignment of IP. Each Founder hereby assigns, transfers, and conveys to the Company all right, title, and interest in and to any and all inventions, discoveries, developments, improvements, works of authorship, trade secrets, know-how, and other intellectual property (collectively, "IP"), whether or not patentable or copyrightable, that the Founder:

(a) has conceived, created, developed, or reduced to practice prior to the Effective Date and that relates to the Company's current or planned business ("Pre-Existing IP**"); or

(b) conceives, creates, develops, or reduces to practice during the Founder's service to the Company, whether or not during regular working hours and whether or not using Company resources ("Company IP**").

2.2 Pre-Existing IP Disclosure. Each Founder shall disclose in writing all Pre-Existing IP on Exhibit B attached hereto. Any IP not disclosed on Exhibit B shall be presumed to be Company IP.

2.3 Excluded IP. Notwithstanding the foregoing, the IP assignment in Section 2.1 does not apply to any invention that qualifies fully under the provisions of California Labor Code Section 2870 (or equivalent statute in the Founder's state of residence), which provides:

"Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer."

2.4 Work-for-Hire. To the extent that any Company IP constitutes a work of authorship, the Founder acknowledges that such work was created as a "work made for hire" as defined in the U.S. Copyright Act, and that the Company is the author and owner of such work.

2.5 Further Assurances. Each Founder agrees to execute any documents and take any actions reasonably requested by the Company to perfect the Company's ownership of all IP assigned hereunder, including executing patent applications, copyright registrations, and assignments.

2.6 Moral Rights Waiver. To the extent permitted by law, each Founder waives any moral rights or similar rights in any Company IP.

3. ROLES AND RESPONSIBILITIES

3.1 Founder Roles. The Founders shall have the following roles and responsibilities:

Founder	Title	Primary Responsibilities
[FOUNDER 1]	[CEO]	[Overall strategy, fundraising, business development, investor relations]
[FOUNDER 2]	[CTO]	[Product development, technology strategy, engineering team management]
[FOUNDER 3]	[COO]	[Operations, finance, HR, legal, customer success]

3.2 Time Commitment. Each Founder agrees to devote substantially all of their business time, energy, and skill to the Company's affairs. "Substantially all" means at least [40/50] hours per week on average, unless otherwise agreed in writing by all Founders.

3.3 Full-Time Commitment. Each Founder represents that they are not and will not become obligated under any agreement or commitment that would conflict with or limit their ability to fulfill their responsibilities to the Company.

3.4 Outside Activities. Founders may engage in outside activities (e.g., angel investing, advisory roles, speaking engagements) provided such activities:

Do not interfere with the Founder's responsibilities to the Company
Do not create a conflict of interest
Are disclosed in advance to the other Founders

3.5 Compensation.

(a) Salary: Founders shall receive the following compensation:

[OPTION 1]: No salary until the Company raises $[X] in funding or achieves $[X] in revenue
[OPTION 2]: Annual salary of $[X], subject to Board approval and available cash

(b) Expenses: The Company shall reimburse Founders for reasonable business expenses incurred in carrying out their responsibilities, subject to the Company's expense reimbursement policy.

4. GOVERNANCE AND DECISION-MAKING

4.1 Board of Directors. The Company's Board of Directors (the "Board") shall initially consist of [1 / 3 / ALL] Founder[s], as follows:

[FOUNDER 1 NAME] (Founder Director)
[FOUNDER 2 NAME] (Founder Director) [if applicable]
[ADDITIONAL DIRECTOR] [if applicable]

4.2 Voting Rights. Each Founder's voting rights shall be proportional to their equity ownership percentage. Decisions shall be made by [majority vote / unanimous consent] of the Founders, except as otherwise provided in this Agreement or required by law.

4.3 Major Decisions Requiring Unanimous Consent. The following decisions require the unanimous written consent of all Founders:

(a) Issuance of equity (stock, options, warrants) to any person, except pursuant to an employee equity incentive plan approved by the Board

(b) Incurrence of debt or other liabilities in excess of $[X]

(c) Sale, transfer, or license of material Company assets or intellectual property

(d) Merger, acquisition, or sale of the Company

(e) Amendments to the Company's Certificate of Incorporation or Bylaws

(f) Admission of new founders or modification of founder equity allocations

(g) Dissolution or liquidation of the Company

(h) Change in the Company's primary business focus or strategic direction

4.4 Day-to-Day Authority. The [CEO / Founder designated by the Board] shall have authority to make day-to-day operational decisions, including:

Hiring and terminating non-executive employees
Entering into contracts up to $[X] in value
Managing cash and bank accounts
Executing the approved budget

4.5 Deadlock. If the Founders are unable to reach agreement on a Major Decision requiring unanimous consent, the Founders shall engage in good-faith mediation in accordance with Section 9 (Dispute Resolution). If mediation fails, the matter shall be resolved by [SPECIFY MECHANISM, e.g., "vote of the Board" or "arbitration"].

5. CONFIDENTIALITY AND RESTRICTIVE COVENANTS

5.1 Confidential Information. Each Founder acknowledges that they will have access to Confidential Information of the Company, including trade secrets, customer lists, business plans, financial information, product information, and other proprietary information. Each Founder agrees to:

(a) Hold all Confidential Information in strict confidence

(b) Not disclose Confidential Information to any third party without prior written consent

(c) Use Confidential Information solely for the benefit of the Company

(d) Return or destroy all Confidential Information upon termination of service

5.2 Non-Compete. During the Founder's service to the Company and for [12 / 18 / 24] months thereafter, the Founder shall not, directly or indirectly:

(a) Engage in any business that competes with the Company's business within [GEOGRAPHIC AREA, e.g., "the United States" or "worldwide"]

(b) Provide services (as an employee, consultant, advisor, or otherwise) to any entity that competes with the Company

"Compete" means engaging in a business that offers products or services that are substantially similar to or directly competitive with the Company's products or services as of the date of the Founder's departure.

Exceptions: This non-compete shall not prohibit:

Passive ownership of less than 5% of a publicly traded company
Providing general business advice that does not involve the Company's Confidential Information
Activities approved in writing by the Board

Note: Non-compete enforceability varies by state. In California, non-competes are generally unenforceable except in narrow circumstances (sale of business, dissolution of partnership). Consult your attorney.

5.3 Non-Solicitation. During the Founder's service to the Company and for [12 / 18 / 24] months thereafter, the Founder shall not, directly or indirectly:

(a) Employee Non-Solicitation: Solicit, recruit, or hire any employee, contractor, or consultant of the Company to leave the Company or to work for any other entity

(b) Customer Non-Solicitation: Solicit or attempt to divert any customer, client, or business partner of the Company for any business purpose that competes with the Company

6. DEPARTURE AND TERMINATION

6.1 Voluntary Departure. If a Founder voluntarily resigns from the Company, the following shall apply:

(a) Unvested Shares: The Company shall have the right to repurchase all unvested shares at the original purchase price (typically $0.0001-$0.001 per share), as set forth in the Restricted Stock Purchase Agreement

(b) Vested Shares: The departing Founder shall retain all vested shares, subject to the Right of First Refusal in Section 6.5

(c) Notice Period: The Founder shall provide at least [30 / 60 / 90] days' written notice of resignation, unless a shorter period is agreed to by the Board

(d) Transition Assistance: The Founder shall reasonably cooperate in transitioning their responsibilities to another Founder or employee

6.2 Termination for Cause. The Company may terminate a Founder's service for "Cause," which includes:

(a) Willful misconduct or gross negligence in the performance of duties

(b) Conviction of, or plea of guilty or no contest to, a felony or crime involving moral turpitude

(c) Fraud, embezzlement, theft, or dishonesty against the Company

(d) Material breach of this Agreement, the Restricted Stock Purchase Agreement, or any other agreement with the Company

(e) Violation of Company policies, including sexual harassment, discrimination, or workplace violence policies

(f) Engaging in conduct that materially harms the Company's reputation or business

Effect of Termination for Cause:

All unvested shares are immediately forfeited (no repurchase payment)
Vested shares are subject to the Right of First Refusal in Section 6.5
All Confidential Information must be returned
Restrictive covenants in Section 5 continue to apply

6.3 Termination Without Cause. The Company may terminate a Founder's service without Cause at any time. In such event:

(a) The Company shall repurchase all unvested shares at the original purchase price

(b) The Founder shall retain all vested shares, subject to the Right of First Refusal in Section 6.5

(c) [OPTIONAL] The Company shall provide [X months] of severance pay equal to [X]% of the Founder's then-current salary

6.4 Termination by Mutual Agreement. The Founders may agree in writing to modify or waive any of the terms in this Section 6, including agreeing to allow a departing Founder to retain a larger portion of equity or to accelerate vesting.

6.5 Right of First Refusal (ROFR). If a Founder desires to sell, transfer, or otherwise dispose of any vested shares, the Founder must first offer such shares to:

(a) The Company (first priority)

(b) The remaining Founders, pro rata based on their equity ownership (second priority)

The Company and Founders shall have [30] days to accept the offer on the same terms offered by the third-party purchaser. If the Company and Founders decline, the Founder may sell to the third party within [60] days, subject to Board approval.

6.6 No Guaranteed Employment. Nothing in this Agreement guarantees any Founder a right to continued employment or service to the Company. Each Founder's service is at-will and may be terminated by either party at any time, with or without Cause or notice, subject to the terms of this Agreement.

7. REPRESENTATIONS AND WARRANTIES

Each Founder represents and warrants to the Company and the other Founders that:

(a) Authority: The Founder has the legal capacity and authority to enter into this Agreement

(b) No Conflicts: The Founder is not party to any agreement or obligation that would conflict with this Agreement or limit the Founder's ability to perform their duties

(c) Disclosure: All information provided to the Company and other Founders, including Pre-Existing IP disclosures, is accurate and complete

(d) Ownership of IP: The Founder is the sole owner of all Pre-Existing IP listed on Exhibit B, free from any liens, claims, or encumbrances

(e) Compliance with Law: The Founder will comply with all applicable laws and regulations in performing their duties

8. TERM AND TERMINATION OF AGREEMENT

8.1 Term. This Agreement shall commence on the Effective Date and shall continue until terminated as provided herein.

8.2 Termination. This Agreement shall terminate:

(a) Upon the mutual written agreement of all Founders

(b) Automatically upon the dissolution or liquidation of the Company

(c) With respect to a specific Founder, upon such Founder's departure from the Company (but Sections 2, 5, 6, 9, and 10 shall survive)

8.3 Survival. The following provisions shall survive termination of this Agreement: Section 2 (Intellectual Property Assignment), Section 5 (Confidentiality and Restrictive Covenants), Section 6 (Departure and Termination), Section 9 (Dispute Resolution), and Section 10 (General Provisions).

9. DISPUTE RESOLUTION

9.1 Informal Resolution. In the event of any dispute arising out of or relating to this Agreement, the Founders shall first attempt to resolve the dispute through good-faith negotiation.

9.2 Mediation. If the dispute is not resolved within 30 days of initiating informal discussions, the parties shall engage in mediation administered by JAMS (Judicial Arbitration and Mediation Services) or a mutually agreed mediator. The parties shall share the cost of mediation equally.

9.3 Arbitration. If mediation does not resolve the dispute within 60 days, the dispute shall be resolved by binding arbitration administered by JAMS in accordance with its Comprehensive Arbitration Rules and Procedures. The arbitration shall be conducted by a single arbitrator in [CITY, STATE]. The arbitrator's decision shall be final and binding and may be entered as a judgment in any court of competent jurisdiction.

9.4 Costs. Each party shall bear its own attorneys' fees and costs, except that the arbitrator may award attorneys' fees and costs to the prevailing party if authorized by applicable law.

9.5 Injunctive Relief. Notwithstanding the foregoing, any party may seek injunctive or equitable relief in court to prevent irreparable harm (e.g., breach of confidentiality, misappropriation of intellectual property) without first proceeding to mediation or arbitration.

9.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [STATE], without regard to conflict of laws principles.

10. GENERAL PROVISIONS

10.1 Entire Agreement. This Agreement, together with the Restricted Stock Purchase Agreement (Exhibit A) and any other documents expressly referenced herein, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, and discussions.

10.2 Amendments. This Agreement may be amended only by a written instrument signed by all Founders and the Company.

10.3 Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom the waiver is sought. No waiver of any breach shall constitute a waiver of any other breach.

10.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall continue in full force and effect, and the invalid provision shall be reformed to the extent necessary to make it valid and enforceable while preserving the parties' intent.

10.5 Assignment. This Agreement is personal to each Founder and may not be assigned or transferred without the prior written consent of all Founders and the Company.

10.6 Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally, sent by confirmed email, or sent by certified mail, return receipt requested, to the addresses set forth on the signature page.

10.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Electronic signatures (including PDF and DocuSign) shall have the same force and effect as original signatures.

10.8 Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties and their permitted successors and assigns, and nothing herein shall confer any right, benefit, or remedy upon any other person or entity.

10.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, and permitted assigns.

IN WITNESS WHEREOF, the parties have executed this Founder Agreement as of the Effective Date.

COMPANY:

[COMPANY LEGAL NAME]

By: ____________________________

Name: ____________________________

Title: ____________________________

Date: ____________________________

FOUNDERS:

[FOUNDER 1 NAME]

Signature: ____________________________

Address: ____________________________

Email: ____________________________

Date: ____________________________

[FOUNDER 2 NAME]

Signature: ____________________________

Address: ____________________________

Email: ____________________________

Date: ____________________________

[FOUNDER 3 NAME]

Signature: ____________________________

Address: ____________________________

Email: ____________________________

Date: ____________________________

EXHIBIT A: RESTRICTED STOCK PURCHASE AGREEMENT

[Note: This is a summary. A full Restricted Stock Purchase Agreement should be prepared by your attorney and executed by each Founder.]

The Restricted Stock Purchase Agreement should include:

Grant of Shares: Number of shares purchased by the Founder
Purchase Price: Price per share (typically $0.0001-$0.001)
Vesting Schedule: 4-year vesting with 1-year cliff, monthly vesting thereafter
Repurchase Right: Company's right to repurchase unvested shares upon termination
Repurchase Price: Original purchase price paid by the Founder
Exercise of Repurchase Right: Company has 90 days to exercise repurchase right
Transfer Restrictions: Shares may not be transferred without Company consent
Right of First Refusal: Company has ROFR on any proposed sale of vested shares
83(b) Election Acknowledgment: Founder acknowledges responsibility to file 83(b) election within 30 days

Each Founder must sign a separate Restricted Stock Purchase Agreement.

EXHIBIT B: PRE-EXISTING INTELLECTUAL PROPERTY DISCLOSURE

Each Founder shall list below all Pre-Existing IP that they are contributing to the Company:

[FOUNDER 1 NAME]:

IP Description	Type	Date Created	Status
[Example: Mobile app prototype for task management]	Software	[MM/DD/YYYY]	[Assigning to Company]
[Example: Domain name taskapp.com]	Trademark/Domain	[MM/DD/YYYY]	[Assigning to Company]

[FOUNDER 2 NAME]:

IP Description	Type	Date Created	Status
[None]	N/A	N/A	N/A

[FOUNDER 3 NAME]:

IP Description	Type	Date Created	Status
[None]	N/A	N/A	N/A

If a Founder has no Pre-Existing IP to disclose, they should write "None" or "N/A."

📥 Download This Template

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✅ Customization Checklist

Before executing your founder agreement, ensure you've completed these steps:

[ ] List all co-founders with names, equity percentages, and roles
[ ] Specify total shares outstanding after founder grants
[ ] Define vesting commencement date (incorporation date or start date)
[ ] Choose acceleration provisions (none, single-trigger, or double-trigger)
[ ] Define "Major Decisions" requiring unanimous consent
[ ] Specify time commitment expectations (full-time = 40+ hours/week)
[ ] Determine initial salaries (if any) or deferred compensation plan
[ ] List any Pre-Existing IP on Exhibit B
[ ] Customize non-compete geographic scope and duration (check state law)
[ ] Specify notice period for voluntary departure (30-90 days)
[ ] Define "Cause" for termination (add company-specific grounds if needed)
[ ] Choose dispute resolution location (city, state)
[ ] Choose governing law (typically state of incorporation)
[ ] Have all founders sign the Agreement
[ ] Have each founder sign a separate Restricted Stock Purchase Agreement
[ ] File 83(b) elections within 30 days (critical!)
[ ] Have your attorney review before signing (strongly recommended)

🔍 Key Provisions Explained

1. Vesting Schedule (4-Year with 1-Year Cliff)

Why it matters: Vesting protects the company and remaining founders from someone who commits but doesn't follow through.

Example Scenario:

Three co-founders split equity 33% / 33% / 33%
One founder leaves after 6 months (before the cliff)
That founder gets 0% equity (all unvested shares are repurchased)
The company can re-grant those shares to a new co-founder or employee

Without vesting, the departing founder would walk away with 33% of the company despite only contributing for 6 months.

When should vesting start?

Option 1: Date of incorporation (if all founders start working immediately)
Option 2: Date each founder begins working full-time (if founders start at different times)
Option 3: Backdated to when founders started working together (if incorporating after significant work has been completed)

Investors expect vesting to start no earlier than the date of full-time commitment.

2. Intellectual Property Assignment

Why it matters: Investors will not fund your startup if individual founders (rather than the company) own key IP.

What gets assigned:

Pre-Existing IP: Code, designs, inventions created before incorporation that relate to the business
Company IP: Everything created during founder's service to the company

Pre-Existing IP Disclosure (Exhibit B):

Founders must list all Pre-Existing IP they're contributing
Failure to disclose can create IP ownership disputes later
If a founder has no Pre-Existing IP, they should write "None"

California Labor Code Section 2870:

Carves out inventions created entirely on your own time, without company resources, that don't relate to the company's business
Most IP related to your startup does NOT qualify for this exception

3. Equity Splits

How to determine equity splits:

Equal splits (e.g., 33/33/33): Simple and fair if all founders contribute equally
Unequal splits (e.g., 50/30/20): Reflects different contributions, roles, or prior work
Dynamic equity: Equity adjusts over time based on contributions (complex, requires tools like Slicing Pie)

Factors to consider:

Time commitment (full-time vs. part-time)
Prior work or IP contributed
Role and responsibilities (CEO typically gets slightly more)
Fundraising ability and network
Domain expertise

Avoid:

Giving a non-working "idea person" significant equity (investors hate this)
Splitting equity before incorporating (use this Agreement to formalize splits after incorporation)

4. Roles and Responsibilities

Why define roles: Prevents overlap and conflict by clarifying who's responsible for what.

Typical startup roles:

CEO: Overall strategy, fundraising, business development, investor relations
CTO: Product development, technology strategy, engineering team
COO: Operations, finance, HR, legal, customer success

Roles can evolve as the startup grows (e.g., CEO may initially do sales, COO may initially do customer support).

5. Decision-Making Authority

Major Decisions requiring unanimous consent:

Issuing new equity (prevents dilution without all founders' agreement)
Selling the company
Changing the business focus
Incurring significant debt

Day-to-day decisions:

CEO (or designated founder) has authority for operational decisions
Avoids constant need for founder approval

Deadlock resolution:

Mediation first
If mediation fails, arbitration or Board vote (if Board includes outside directors)

6. Departure and Termination

Voluntary Departure:

Founder keeps vested shares
Company repurchases unvested shares at original price (typically $0.0001/share)
Right of First Refusal applies to vested shares (company and founders can buy before outside sale)

Termination for Cause:

Unvested shares are forfeited (not repurchased)
More severe penalty reflects founder's wrongdoing
"Cause" must be clearly defined

Termination Without Cause:

Founder keeps vested shares
Company repurchases unvested shares at original price
Optional: Severance pay (typically 0-6 months)

7. Non-Compete and Non-Solicitation

Non-Compete:

Prevents founder from competing after departure
Duration: 12-24 months is typical
Geography: US or worldwide, depending on business
Enforceability: Varies by state (California generally does not enforce non-competes except in limited circumstances)

Non-Solicitation:

Prevents founder from hiring away employees or stealing customers
More widely enforceable than non-competes
Duration: 12-24 months is typical

California Exception: California Business & Professions Code Section 16600 generally prohibits non-competes, except in connection with the sale of a business, dissolution of a partnership, or dissociation of a partner. Non-solicitation provisions are more enforceable.

8. 83(b) Election

Critical: Each founder must file an 83(b) election with the IRS within 30 days of receiving restricted stock.

Why: Without an 83(b) election, you'll owe taxes on the value of shares as they vest. With an 83(b) election, you pay taxes upfront on the (typically negligible) value at grant, and all future appreciation is taxed as capital gains when you sell.

Example without 83(b):

You receive 1M shares worth $0.0001/share ($100 total value)
After 2 years, 500K shares vest, now worth $0.50/share ($250K value)
You owe ordinary income tax on $250K (even though you haven't sold)

Example with 83(b):

You receive 1M shares worth $0.0001/share ($100 total value)
You pay tax on $100 immediately (negligible)
When you sell shares years later for $1M, you pay capital gains tax on $999,900

How to file: See IRS instructions or consult your accountant. Must be filed within 30 days (no extensions).

💡 When to Use This Template

✅ Use this founder agreement for:

Co-Founder Relationships
- 2-4 co-founders starting a company together
- Equity splits between co-founders
- Long-term commitment expected from all founders
Timing
- Ideal: Before incorporation or immediately after
- Acceptable: Within the first few months of working together
- Too late: After raising institutional funding (investors will require retroactive vesting, which has tax consequences)

❌ Don't use this template for:

Solo Founders (not needed if there's only one founder)
Employees (use an offer letter with equity grant under the company's equity incentive plan)
Advisors (use an advisor agreement with advisor equity)
Consultants or Contractors (use a consulting agreement with potential equity)

⚠️ Common Mistakes to Avoid

1. Not Having a Founder Agreement at All

Problem: 50% of startups fail due to co-founder conflict. Without a founder agreement:

No vesting protection if a founder leaves early
No clarity on roles, decision-making, or IP ownership
Difficult to resolve disputes

Solution: Execute a founder agreement before or immediately after incorporating.

2. Equal Splits Without Vesting

Problem: "We're all equal partners, so we split 50/50 with no vesting."

One founder leaves after 3 months but keeps 50% of the company
Remaining founder is stuck with a non-contributing co-founder who owns half the company

Solution: Always use vesting, even for equal splits.

3. Not Assigning IP to the Company

Problem: Founders build the product before incorporating, then incorporate without assigning IP.

Individual founders own the IP, not the company
Investors refuse to fund because IP ownership is unclear

Solution: Assign all Pre-Existing IP and Company IP to the company in the founder agreement.

4. Not Filing 83(b) Elections

Problem: Founders receive restricted stock but don't file 83(b) elections within 30 days.

Massive tax bill as shares vest (taxed as ordinary income)
Can't retroactively file 83(b) after 30-day deadline

Solution: File 83(b) elections immediately (within 30 days of grant). Set calendar reminders.

5. Vesting That Starts Too Early

Problem: Founders backdate vesting to the date they started working together (e.g., 2 years ago), giving themselves 50% vested equity on day 1.

Investors see this as a red flag (founders aren't truly committed to 4-year vesting)
Defeats the purpose of vesting

Solution: Vesting should start on the date of full-time commitment or incorporation, not before.

6. Unclear Roles and Responsibilities

Problem: Founders don't clarify who's responsible for what, leading to overlap or gaps.

Conflicts over who makes decisions
Important tasks fall through the cracks

Solution: Define roles clearly (CEO, CTO, etc.) and update as the company grows.

7. No Dispute Resolution Mechanism

Problem: Founders deadlock on a major decision with no way to resolve it.

Company is paralyzed
Founders may need to litigate (expensive and time-consuming)

Solution: Include mediation and arbitration provisions for disputes.

8. Overly Restrictive Non-Competes

Problem: Non-compete prohibits founder from working in their industry for 5 years worldwide.

Likely unenforceable (unreasonably broad)
May prevent you from attracting talented co-founders

Solution: Use reasonable non-competes (12-24 months, limited to company's specific business) and focus more on non-solicitation.

📚 Related Resources

Promise Legal Resources

External Resources

💬 FAQs

When should we sign a founder agreement?

Before incorporating or within the first 30 days after incorporating. The longer you wait, the more complicated it becomes:

Ideal: Sign before or simultaneously with incorporation
Acceptable: Within 30 days (so you can file 83(b) elections on time)
Problematic: After raising funding (investors will require retroactive vesting, which has tax consequences)

Should we use equal or unequal equity splits?

It depends on your situation:

Equal splits (e.g., 50/50 or 33/33/33):

✅ Simple and avoids conflict
✅ Fair if all founders contribute equally
⚠️ Can be problematic if one founder is clearly more valuable (e.g., CEO with fundraising network vs. CTO)

Unequal splits (e.g., 50/30/20):

✅ Reflects different contributions, roles, or prior work
✅ Can incentivize the most critical founder (usually CEO)
⚠️ Can create resentment if not carefully discussed

Factors to consider:

Time commitment (full-time vs. part-time)
Prior work or IP contributed
Role and responsibilities
Fundraising ability and network
Domain expertise

Avoid:

Giving a non-working "idea person" significant equity
Large equity grants to people who aren't fully committed

What if one founder contributed code or IP before we incorporated?

That founder should disclose the Pre-Existing IP on Exhibit B and assign it to the company in the founder agreement.

Without IP assignment:

The founder personally owns the code/IP, not the company
Investors will refuse to fund
If the founder leaves, they could take the IP with them

With IP assignment:

The company owns all IP (both pre-existing and future)
Investors are satisfied
No disputes if a founder departs

What if a founder wants to leave but hasn't vested yet?

The company repurchases the unvested shares at the original purchase price (typically $0.0001-$0.001 per share).

Example:

Founder has 1M shares with 4-year vesting + 1-year cliff
Founder leaves after 18 months (25% vested at month 12, plus 6 months of monthly vesting = ~37.5% vested)
Founder keeps ~375K shares (vested)
Company repurchases ~625K shares (unvested) for $62.50 (at $0.0001/share)

The company can then re-grant those shares to a new co-founder, employee, or future hire.

Should we include single-trigger or double-trigger acceleration?

Most investors prefer no acceleration or double-trigger acceleration only.

Single-Trigger Acceleration:

Vesting accelerates upon acquisition
Problem: Founders could leave immediately after acquisition, defeating the purpose of vesting
Investors dislike this

Double-Trigger Acceleration:

Requires TWO events: (1) acquisition AND (2) termination without cause
More balanced: Protects founders if they're fired post-acquisition but ensures they stay if not
Investors accept this (especially for 50% acceleration)

No Acceleration:

Vesting continues on original schedule
Most investor-friendly
Standard for early-stage startups

What if we can't agree on equity splits?

Use a facilitator or framework:

Open discussion: Each founder states what they think is fair and why
Consider dynamic equity: Tools like Slicing Pie allocate equity based on contributions over time (complex but fair)
Third-party advisor: Ask a mentor, advisor, or attorney for an objective opinion
Revisit later: If you can't agree now, use a temporary split (e.g., equal) with the understanding that you'll revisit after 3-6 months

Red flag: If you can't agree on equity splits, you may have a deeper co-founder compatibility issue. Consider whether you should move forward together.

Do we need an attorney to review this?

Strongly recommended. Founder agreements are legally binding contracts. An attorney can:

Customize the agreement to your specific situation
Ensure compliance with state law (e.g., non-compete enforceability)
Advise on equity splits and vesting terms
Review Pre-Existing IP disclosures
Prepare Restricted Stock Purchase Agreements and 83(b) elections

Cost: $1,500 - $5,000 depending on complexity and location.

Can we change the founder agreement later?

Yes, but only with unanimous written consent of all founders and the company.

Common amendments:

Adjusting equity splits (requires Board approval and potentially new stock grants)
Adding or removing founders
Changing vesting schedules (be careful of tax consequences)
Updating roles and responsibilities

Investors typically require that any changes to founder agreements be approved by the Board (which may include investor representatives).

What happens to founder equity when we raise funding?

Founder equity is diluted, but the vesting schedule continues on the same timeline.

Example:

You own 50% of the company (500K shares out of 1M total)
You raise a Series A and issue 250K new shares to investors
You now own 40% of the company (500K shares out of 1.25M total)
Your vesting schedule continues unchanged (you still vest the same number of shares)

Vesting schedules typically do NOT reset when you raise funding (unless you negotiate otherwise).

What's the difference between this founder agreement and a shareholders' agreement?

Founder Agreement:

Among co-founders (before or immediately after incorporation)
Covers vesting, IP assignment, roles, and founder-specific terms
May be replaced or supplemented by a shareholders' agreement after raising funding

Shareholders' Agreement:

Among all shareholders (founders + investors)
Covers drag-along rights, tag-along rights, board composition, information rights, and investor protections
Typically executed in connection with a priced equity round (Series A or later)

For early-stage startups, a founder agreement is sufficient until you raise institutional funding.

🚀 Next Steps

Discuss equity splits with your co-founders openly and honestly
Download this template (Word or PDF format)
Customize all sections with your company and founder information
Complete Exhibit B (Pre-Existing IP Disclosure) for each founder
Have your attorney review (strongly recommended)
Execute the agreement (all founders and company sign)
Prepare Restricted Stock Purchase Agreements for each founder (have attorney draft)
File 83(b) elections within 30 days (critical!)
Store signed documents securely (company records + each founder's personal records)
Update cap table to reflect founder equity and vesting schedules

📞 Need Help?

Navigating founder equity, vesting, and IP assignment can be complex. Promise Legal offers founder agreement review and customization services for startups, including:

Equity split advice and negotiation facilitation
Customized founder agreements and restricted stock purchase agreements
83(b) election preparation and filing
IP assignment review

Contact us for a consultation.

This template is provided for informational purposes only and does not constitute legal advice. Consult with a qualified attorney before using this template.

Founder Agreement Template with Vesting (2025)

📋 Quick Facts

🎯 What This Template Includes

📊 Why You Need a Founder Agreement

Protects All Founders

Required by Investors

Prevents Co-Founder Disputes

🔄 Standard Vesting Structure

What is Vesting?

Standard 4-Year Vesting with 1-Year Cliff

Why a 1-Year Cliff?

Acceleration Provisions

📝 Founder Agreement Template

Instructions for Customization

FOUNDER AGREEMENT

RECITALS

1. EQUITY OWNERSHIP AND VESTING

2. INTELLECTUAL PROPERTY ASSIGNMENT

3. ROLES AND RESPONSIBILITIES

4. GOVERNANCE AND DECISION-MAKING

5. CONFIDENTIALITY AND RESTRICTIVE COVENANTS

6. DEPARTURE AND TERMINATION

7. REPRESENTATIONS AND WARRANTIES

8. TERM AND TERMINATION OF AGREEMENT

9. DISPUTE RESOLUTION

10. GENERAL PROVISIONS

EXHIBIT A: RESTRICTED STOCK PURCHASE AGREEMENT

EXHIBIT B: PRE-EXISTING INTELLECTUAL PROPERTY DISCLOSURE

📥 Download This Template

✅ Customization Checklist

🔍 Key Provisions Explained

1. Vesting Schedule (4-Year with 1-Year Cliff)

2. Intellectual Property Assignment

3. Equity Splits

4. Roles and Responsibilities

5. Decision-Making Authority

6. Departure and Termination

7. Non-Compete and Non-Solicitation

8. 83(b) Election

💡 When to Use This Template

✅ Use this founder agreement for:

❌ Don't use this template for:

⚠️ Common Mistakes to Avoid

1. Not Having a Founder Agreement at All

2. Equal Splits Without Vesting

3. Not Assigning IP to the Company

4. Not Filing 83(b) Elections

5. Vesting That Starts Too Early

6. Unclear Roles and Responsibilities

7. No Dispute Resolution Mechanism

8. Overly Restrictive Non-Competes

📚 Related Resources

Promise Legal Resources

External Resources

💬 FAQs

When should we sign a founder agreement?

Should we use equal or unequal equity splits?

What if one founder contributed code or IP before we incorporated?

What if a founder wants to leave but hasn't vested yet?

Should we include single-trigger or double-trigger acceleration?

What if we can't agree on equity splits?

Do we need an attorney to review this?

Can we change the founder agreement later?

What happens to founder equity when we raise funding?

What's the difference between this founder agreement and a shareholders' agreement?

🚀 Next Steps

📞 Need Help?

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