The Complete Founders Agreement Checklist: 15 Clauses You Cannot Skip

Why You Need a Checklist

A founders agreement is only as strong as the clauses it contains. Skip one critical provision and you could find yourself in a dispute with no framework for resolution, or worse, in court arguing over terms that were never documented.

The problem is that most founders are not lawyers. They do not know what they do not know. They might cover equity and roles but forget about IP assignment. They might address decision-making but skip departure terms. And every missing clause is a potential landmine waiting for the wrong moment to go off.

This checklist covers the 15 essential clauses that every founders agreement should include. Use it as a reference when drafting your own agreement, and do not sign anything until you have confirmed that each item is addressed.

1. Company Formation Details

Every founders agreement should start with the basics. What is the legal name of the company? What type of entity is it (LLC, C-Corp, S-Corp)? What state or jurisdiction is it formed in? When was it or will it be incorporated?

These details establish the legal context for the entire agreement. They also ensure that all founders are aligned on fundamental decisions about the company's structure. An LLC and a C-Corp have very different tax implications, governance rules, and investor appeal. Make sure everyone is on the same page.

2. Equity Ownership Percentages

This is the clause that gets the most attention, and for good reason. It defines how much of the company each founder owns. The equity split should reflect the overall contributions of each founder, including time, capital, expertise, IP, and opportunity cost.

Document the exact percentages. Do not leave this as a verbal agreement or an approximate number. If it is 55/45, write 55/45. If it is 60/25/15 among three founders, document it precisely. Ambiguity here leads to the most expensive disputes in startup law.

3. Vesting Schedule

Equity ownership and equity vesting are different things. The ownership clause says you are entitled to 40% of the company. The vesting schedule says you earn that 40% over time, contingent on your continued involvement with the company.

The standard structure is a four-year vesting period with a one-year cliff. Under this arrangement, no equity vests during the first year. At the one-year mark, 25% of your total allocation vests at once. The remaining 75% vests in equal monthly or quarterly installments over the next three years.

Your vesting clause should also address:

• Acceleration triggers: Does vesting accelerate upon a change of control (acquisition) or termination without cause?
• Good leaver vs. bad leaver provisions: What happens to unvested shares if a founder departs under different circumstances?

4. Capital Contributions

Who is putting money into the company, and how much? Capital contributions might include cash investments, equipment, or other assets. This clause should document:

• The amount and timing of each founder's financial contribution
• Whether contributions are treated as equity purchases, loans, or convertible instruments
• What happens if additional capital is needed. Are founders obligated to contribute more, or is it optional?
• How capital contributions relate to equity ownership (if at all)

This is especially important when one founder is funding initial operations while the other is contributing primarily through labor.

5. Roles and Responsibilities

Define what each founder is responsible for. This goes beyond titles. A title like "CEO" or "CTO" is a starting point, but the agreement should specify the actual duties and areas of authority for each person.

Consider including:

• Primary areas of responsibility (product, engineering, sales, operations, finance)
• Specific decision-making authority within each area
• Reporting expectations and communication cadence
• How roles may evolve as the company grows
• The process for changing role assignments

6. Time Commitment

Is each founder working full-time on the business? Part-time? What constitutes full-time? This clause should specify:

• The expected hours per week for each founder
• Whether founders are permitted to hold other employment or side projects
• How time commitment might change during different stages of the company
• What happens if a founder's time commitment falls below the agreed-upon level

Mismatched time commitments are one of the most common sources of founder conflict. A clause that addresses this upfront eliminates the ambiguity that breeds resentment.

7. Compensation and Expense Reimbursement

In the early days, founders often work without salary. But the agreement should still address compensation:

• Whether founders will receive a salary, and if so, how much
• When salaries will begin (at a certain revenue level, after funding, etc.)
• How salary amounts are determined and whether they must be approved by all founders or a board
• Whether any founder is receiving deferred compensation
• How business expenses are reimbursed

Even if no one is taking a salary now, document the framework for when compensation begins. This prevents awkward negotiations later.

8. Decision-Making and Voting Rights

How are decisions made? This is critical for preventing deadlock, especially in two-person founding teams. Your decision-making clause should define:

• Operational decisions: Who has authority over day-to-day decisions within their area of responsibility
• Major decisions: What requires a unanimous vote or supermajority (hiring above a certain level, expenditures above a threshold, new equity issuances, pivots, acquisitions)
• Deadlock resolution: What happens when founders cannot agree on a major decision. Options include bringing in a trusted advisor, a board vote, mediation, or designating one founder with final authority on specific categories

Be specific about what constitutes a "major decision." A vague standard like "significant business decisions" leaves too much room for disagreement about whether a particular choice qualifies.

9. Intellectual Property Assignment

All IP created by founders for the company should belong to the company, not the individual. This clause should cover:

• Assignment of new IP: Everything created in connection with the company's business is assigned to the company
• Pre-existing IP: Any relevant IP that a founder brings to the company is formally transferred or licensed
• Disclosure of restrictions: Any IP that cannot be assigned due to prior employment agreements or third-party obligations is disclosed
• Work product ownership: All work product, including code, designs, business plans, customer lists, and trade secrets, belongs to the company

Without this clause, a departing founder could argue that key pieces of your product or technology belong to them personally.

10. Confidentiality and Non-Disclosure

Founders have access to the company's most sensitive information: financial data, product roadmaps, customer information, trade secrets, and strategic plans. A confidentiality clause ensures this information is protected both during and after a founder's involvement with the company.

The clause should specify:

• What constitutes confidential information
• Obligations to protect confidential information during the relationship
• Duration of confidentiality obligations after departure (typically two to five years, or indefinitely for trade secrets)
• Exceptions for information that becomes publicly available or is independently developed

11. Non-Compete and Non-Solicitation

These clauses restrict what founders can do after leaving the company:

• Non-compete: Prevents a departing founder from starting or joining a competing business for a specified period (typically one to two years) within a defined geographic area or market
• Non-solicitation: Prevents a departing founder from recruiting the company's employees or soliciting its customers for a specified period

Be aware that non-compete enforceability varies significantly by jurisdiction. Some states, like California, severely limit or prohibit non-compete clauses. Your agreement should be drafted with the applicable state law in mind.

12. Departure Terms

What happens when a founder leaves? This clause should address multiple scenarios:

• Voluntary resignation: The founder chooses to leave. What are the notice requirements? What happens to vested and unvested equity?
• Termination for cause: The founder is removed for specific reasons (breach of agreement, fraud, criminal conduct). Define what constitutes cause and the consequences.
• Termination without cause: The founder is removed but has not done anything wrong. What protections do they have?
• Buyback rights: Can the company or remaining founders purchase the departing founder's vested equity? At what price and on what terms?

13. Death and Disability

No one wants to think about this, but failing to address it creates enormous problems for the surviving founders and the deceased or disabled founder's family.

This clause should specify:

• What happens to a deceased or disabled founder's equity (does it transfer to their estate, or does the company have a buyback right?)
• How the company values the equity for buyback purposes
• Whether key-person insurance is required to fund the buyback
• How the company transitions the founder's responsibilities
• The definition of "disability" for purposes of triggering this clause

14. Dispute Resolution

Disagreements are inevitable. The question is whether they are resolved efficiently or whether they escalate into expensive litigation. A dispute resolution clause sets the process:

• Informal resolution: Founders first attempt to resolve disputes through direct discussion
• Mediation: If direct discussion fails, a neutral mediator helps facilitate resolution
• Arbitration or litigation: If mediation fails, the dispute is resolved through binding arbitration or court proceedings

Most startup agreements favor arbitration over litigation because it is faster, less expensive, and confidential. Specify the arbitration rules (such as JAMS or AAA), the location, and how costs are shared.

15. Governing Law and Jurisdiction

Which state's laws govern the agreement? Where will disputes be adjudicated? This might seem like a minor detail, but it has significant practical implications.

The governing law determines how the agreement is interpreted, what provisions are enforceable, and what default rules apply to situations not explicitly addressed in the document. The jurisdiction clause determines where legal proceedings take place, which affects convenience, cost, and home-court advantage.

Typically, the governing law should match the state where the company is incorporated. If the company is a Delaware entity, Delaware law usually governs.

Putting It All Together

Fifteen clauses might seem like a lot, but each one addresses a specific risk that founding teams face. Skipping any of them leaves a gap that could be exploited, intentionally or not, during a dispute.

Here is a quick-reference version of the complete checklist:

1. Company formation details
2. Equity ownership percentages
3. Vesting schedule
4. Capital contributions
5. Roles and responsibilities
6. Time commitment
7. Compensation and expense reimbursement
8. Decision-making and voting rights
9. Intellectual property assignment
10. Confidentiality and non-disclosure
11. Non-compete and non-solicitation
12. Departure terms
13. Death and disability
14. Dispute resolution
15. Governing law and jurisdiction

When you review your founders agreement, check each item off this list. If any clause is missing or insufficiently detailed, address it before signing. And as always, have a qualified attorney review the final document to make sure everything holds up under the applicable law.

A comprehensive founders agreement is not about anticipating failure. It is about building the kind of clarity and structure that gives your startup the best chance of success.