Founders' Agreement

A Founders' Agreement is the document by which the founders of a business decide on their rights as they prepare to go into business together.

A Founders' Agreement is similar to an LLC Operating Agreement in that it covers the relationship between the business' founders, just like an LLC Operating Agreement covers the relationship between members. However, the difference is that operating agreements are much more robust in the topics that they cover and are drafted after the LLC is already formed. Founders' Agreements can be drafted anytime individuals decide to go into business together. The Founders' Agreement may or may not still be applicable after a company is actually formed, but it does cover the founders' relationship at the start.

This document is not similar to Articles of Organization or Articles of Incorporation. It will not be filed with any state. It is simply so that the founders understand their relationship to each other and the business.

A Founders' Agreement will not cover the day-to-day operations of a business. Instead, it is simply about how the business begins, and usually has a provision or two about how the business may wrap up if it doesn't work out.

A Founders' Agreement is not legally required, but it is a good idea to have.

How to use this document

It is a good idea to have this document filled out by all of the founders of the business. Before filling this document out, the founders may wish to discuss the major elements of the business and their relationship, so that the form may accurately describe everything.

In this document, identifying details of the business, as well as the founders, will be entered, such as names and addresses. Then several questions will be asked to determine the founders' capital contributions and ownership percentages, followed by questions on their roles and responsibilities, if desired.

When this document is filled out, it should be printed and signed by all of the founders. Then, each founder should keep a copy, and an additional copy should be kept at the primary offices of the business.

Applicable law

Founders' Agreements are generally subject to the laws of individual states. There is no one federal law covering the requirements for a Founders' Agreement. This is because each individual state governs the businesses formed within that state. Founders' Agreement are also not strictly legally necessary.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.