Delaware Co-Founder Agreement - Checklist

• Category: Corporations - Startup - Venture Financing Process
• State: Multi-State
• Control #: US-ENTREP-0027-1
• Format: Word; Rich Text

Description

A Founders' Agreement isa contract that a company's founders enter into that governs their business relationships. The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder.

Delaware Co-Founder Agreement — Checklist: A Comprehensive Guide for Business Partners When establishing a startup or small business, it is crucial to have a solid foundation to ensure a successful partnership between co-founders. One essential document that enables co-founders to set clear expectations and outline their responsibilities is the Delaware Co-Founder Agreement. This comprehensive checklist provides a step-by-step guide for creating an effective agreement tailored to the specific needs of your business. 1. Introduction and Background: — Clearly state the purpose of the agreement and the background information of the co-founders and their roles within the company. — Address the company name, its formation date, and its primary business activity. — Specify the jurisdiction as Delaware, well-known for its favorable business laws. 2. Ownership and Equity Distribution: — Clearly define the ownership structure and the equity distribution among co-founders. — Determine the initial capital contributions made by each co-founder, including cash, assets, or intellectual property. — Outline how equity will be vested and any potential restrictions on transferring or selling shares. 3. Roles and Responsibilities: — Define the roles and responsibilities of each co-founder, ensuring a clear understanding of their individual duties. — Specify decision-making protocols, voting rights, and procedures for resolving disputes or conflicts. — Determine the time commitments and expected contributions of each co-founder, such as working hours or skill utilization. 4. Compensation and Benefits: — Detail the compensation structure for co-founders, including salaries, bonuses, profit sharing, or performance-based incentives. — Discuss potential benefits, such as healthcare, retirement plans, or stock options. — Set guidelines for reimbursement of expenses and allowances. 5. Intellectual Property: — Address the ownership of intellectual property, including patents, trademarks, copyrights, or trade secrets. — Establish procedures for assigning or licensing intellectual property rights to the company. — Ensure that any pre-existing intellectual property brought into the partnership is clearly identified and protected. 6. Non-Compete and Non-Disclosure: — Include clauses that prevent co-founders from engaging in similar business activities or sharing confidential information with competitors during the partnership and even after its termination. — Ensure that the specified duration and geographic scope of the non-compete clauses are reasonable and enforceable. 7. Termination and Exit Strategy: — Define the circumstances under which the co-founder agreement can be terminated, such as breach of contract, death, disability, or voluntary departure. — Establish guidelines for the distribution of assets, including founders' equity and intellectual property, in case of termination. — Include provisions for buyouts or the right of first refusal if a co-founder wishes to sell or transfer their shares. Different types of Delaware Co-Founder Agreement — Checklist may include: 1. Standard Delaware Co-Founder Agreement: — Covers the essential aspects mentioned above, providing a comprehensive framework for co-founders. 2. Tech Startup Delaware Co-Founder Agreement: — Focuses on additional provisions specific to technology-based startups, such as software development, patent protection, or licensing agreements. 3. Funding-based Delaware Co-Founder Agreement: — Includes additional clauses related to fundraising, equity dilution, and the role of outside investors or venture capitalists. 4. LLC Operating Agreement — Delaware— - Specifically designed for companies structured as Limited Liability Companies (LCS), addressing unique aspects of governance, taxation, and limited liability in Delaware. In conclusion, a Delaware Co-Founder Agreement is a vital document that outlines the expectations, responsibilities, and rights of co-founders. By following a comprehensive checklist and considering different variations based on specific business needs, co-founders can establish a strong partnership and protect their interests throughout their entrepreneurial journey.