Founder Agreement: What to Include, With a Free Template

A founder agreement is a written contract among a startup's co-founders that sets out roles, equity, vesting, IP assignment, decision-making and what happens if someone leaves. It turns unspoken assumptions into written terms, which can protect your equity and your next round. In our view it is worth signing one early, ideally before you incorporate or issue shares.

Definition: A founder agreement is a contract among co-founders that documents each person's responsibilities, ownership, vesting terms, IP assignment and departure rules, usually implemented through the company's stock purchase and IP assignment documents.

Co-founder fights rarely start over the product. They start over who does what, who owns what, and who leaves with what.

Why founder agreements matter

We think any startup with more than one founder benefits from one. Co-founder teams are common among venture-backed companies: Carta's Founder Ownership Report 2026 found that 36 percent of startups that closed rounds on Carta in 2025 had two founders. Carta also found more teams choosing equal splits, with 27.3 percent of three-founder teams dividing equity evenly in 2025, up from 21 percent the year before.

Whatever the split, a founder agreement can:

Reduce disputes by making expectations explicit.
Protect the company if a founder leaves early, through vesting and repurchase rights.
Secure the IP, so the company, not an individual, owns what the team builds.
Make you easier to invest in. Investors typically check founder vesting and IP assignments in due diligence, and gaps can delay or kill a round.

Before you sign, work through the hard conversations. Our 50 questions to ask a potential co-founder is one starting list.

"We're close friends. We don't need a contract."

Fair enough. Paperwork can feel like a vote of no confidence in someone you trust.

But.

The agreement isn't for the good days. It's for month eighteen, when one of you wants to go part-time or the company pivots and a role disappears. Friends can remember the same handshake very differently.

Our take: signing early is respect, not suspicion. And a co-founder who leaves early but keeps a full stake, because nothing was subject to vesting, is exactly the kind of "dead equity" we flag in our take on reading a cap table.

When to create a founder agreement

When we'd suggest doing it (your lawyer may say otherwise):

Before incorporation, or as soon as possible after forming the company.
Before issuing equity or making material business commitments.
Before fundraising or bringing on outside investors.
Whenever roles change, for example when a founder moves from full-time to part-time.

What to include in a founder agreement

Roles and responsibilities. Who leads product, engineering, sales and fundraising, and who has the final call in each area.

Equity split. Each founder's percentage of the company, stated on a fully diluted basis. Track it on a clean cap table; see cap table management for startups. On the split itself, we lean toward weighing what each founder will contribute (see our take on splitting startup equity).

Vesting. Cooley GO describes the common structure for founder stock as vesting over four years with a one-year cliff, in monthly or quarterly increments after the cliff. Cooley GO notes that founders sometimes get retroactive vesting credit for work done before incorporation. Our guide to founder vesting and the 83(b) election covers cliffs, repurchase and acceleration in detail.

Acceleration. Whether unvested shares vest early on a sale. Single-trigger acceleration vests shares on the sale itself; double-trigger requires a sale and a termination without cause afterward.

Repurchase rights. If a founder leaves before fully vesting, the company can buy back unvested shares, typically at the lower of original cost or fair market value, according to Cooley GO. Related transfer restrictions, such as a right of first refusal, control who can buy vested shares.

83(b) elections. Founders who receive stock subject to vesting should consider an 83(b) election. The IRS states that the election must be filed no later than 30 days after the property was transferred, and it can be made on Form 15620. Cooley GO calls the 30 days an absolute deadline that cannot be cured, and notes the IRS began accepting electronic filing of certain 83(b) elections in June 2025. Many founders calendar it the day shares are issued.

IP assignment. Typically, every founder assigns to the company all IP related to the business, including work done before incorporation.

Decision-making and deadlocks. Which decisions need unanimous or majority approval, and how to break a tie (a mediator, an independent director or a named tiebreaker).

Confidentiality and restrictive covenants. Confidentiality is common. Non-competes are a different story. California law voids most of them and, since January 1, 2024, also reaches agreements signed outside the state. The FTC's federal non-compete rule was vacated, and the agency dropped its appeals in September 2025. State law still governs, so we'd have a lawyer draft anything beyond confidentiality and non-solicitation.

How to create a founder agreement, step by step

Align on the key terms. Have the honest conversations about roles, time commitment, salary expectations, equity, and what happens if the company fails or one of you wants out.
Draft the agreement. Start from a template like the one below, then tailor it.
Turn it into company documents. At incorporation, the terms become stock purchase agreements with vesting, IP assignment agreements and bylaws or a shareholder agreement.
Review with counsel. A startup lawyer can check that the terms are enforceable in your state and consistent with your corporate documents.
Sign, file and store. Every founder signs, 83(b) elections go out within 30 days, and copies go into the company's records and data room.
Revisit it. Update the agreement when roles or ownership change.

Example founder agreement template

This Founder Agreement ("Agreement") is made as of [Date] by and among the founders listed below ("Founders") of [Startup Name], a [State] corporation ("Company").

1. Roles and responsibilities

[Founder 1 Name]: CEO. Product vision, fundraising, investor relations.
[Founder 2 Name]: CTO. Technology development, engineering hiring, product roadmap.
[Founder 3 Name]: COO. Operations, sales, customer support.

2. Equity ownership and vesting

Equity split:
[Founder 1 Name]: [ ]% of fully diluted shares
[Founder 2 Name]: [ ]% of fully diluted shares
[Founder 3 Name]: [ ]% of fully diluted shares
Vesting schedule:
Four-year vesting with a one-year cliff: 25% vests after 12 months, and the remainder vests monthly over the next 36 months.
If a Founder leaves before the cliff, no shares have vested.
Acceleration: [none / double-trigger on a change of control].
83(b) elections: Each Founder will consider, with a tax advisor, filing an 83(b) election within 30 days of receiving restricted shares.

3. Intellectual property assignment

Each Founder assigns to the Company all intellectual property developed that relates to the Company's business, including work created before the date of this Agreement.

4. Decision-making and dispute resolution

Major decisions (for example: fundraising, hiring or firing executives, acquisitions, selling the Company) require [unanimous / majority] approval of the Founders.
Disputes not resolved within [X] days are submitted to mediation.

5. Departure and buyback rights

If a Founder leaves for any reason, the Company may repurchase that Founder's unvested shares at the lower of original cost or fair market value.

6. Confidentiality and non-solicitation

Each Founder will keep Company information confidential during and after their involvement.
Each Founder agrees not to solicit Company employees for [X] months after departure, to the extent permitted by applicable law. Any non-compete should be drafted by counsel and may be unenforceable in some states.

Signature:

Founder 1: ____________________ Date: __________\ Founder 2: ____________________ Date: __________\ Founder 3: ____________________ Date: __________

This template is a starting point for discussion, not a substitute for legal documents drafted for your company.

Illustrative example: why vesting matters

Three founders split 3,000,000 shares equally, with four-year vesting and a one-year cliff. Eighteen months in, one founder leaves.

She has vested 25 percent at the cliff plus 6 of the remaining 36 monthly installments (another 12.5 percent), so she keeps 37.5 percent of her 1,000,000 shares, or 375,000. The company can repurchase the other 625,000 unvested shares and use them to recruit a replacement.

Without vesting, she would likely walk away with a full third of the company after a year and a half of work.

Common founder agreement mistakes

Waiting until there's a problem. Agreements are easiest to sign when everyone is optimistic.
Splitting equity without vesting. It can leave the remaining founders carrying a departed co-founder who owns a large stake.
Missing the 83(b) deadline. The IRS's 30-day window is strict.
Leaving IP with individuals. Code or designs owned by a founder personally can block a financing or acquisition.
Copying a non-compete from a template. Enforceability depends on state law.

If you're formalizing a new team and preparing to raise, 1752vc's Ignite, a 12-week startup academy for first-time founders in the early stages, is built for that stretch. Founders still looking for a partner can read how to find a co-founder.

The bottom line

A founder agreement costs a few uncomfortable conversations and a lawyer's review. Skipping it can cost a financing, a friendship, or a third of your company.

Trust gets you to the first day. Vesting gets you through the hard year.

Key takeaways

A founder agreement documents roles, equity, vesting, IP assignment, decisions and departures, ideally before disagreements arise.
Four-year vesting with a one-year cliff is the common structure for founder stock, with repurchase rights on unvested shares.
Founders with vesting stock should consider an 83(b) election, which the IRS requires within 30 days of the transfer.
California law voids most non-competes and the FTC's federal rule was vacated, so state law and counsel are the places to look.
In our view it pays to sign early and turn the agreement into proper company documents at incorporation.

Frequently asked questions

What should a founder agreement include?

In our view, a founder agreement should cover each founder's role, the equity split, vesting and acceleration, the company's right to repurchase unvested shares, IP assignment, decision-making, dispute resolution and confidentiality. Many teams also address time commitment, salaries, expense reimbursement and what happens if the company shuts down, because those are the topics that cause friction later.

When should co-founders sign a founder agreement?

We suggest co-founders sign a founder agreement as early as possible, ideally before incorporation or before any shares are issued, while everyone is still aligned. It helps to have it in place before you raise money or sign major contracts, because investors typically check founder vesting and IP assignments in diligence. Updating it when roles or time commitments change is also wise.

Do founders need vesting?

In most cases, yes. Founder vesting protects the company and the remaining founders if someone leaves early, because unvested shares can be repurchased and reused to recruit a replacement. Cooley GO describes four-year vesting with a one-year cliff as the common structure, Carta uses the same schedule as its example, and venture investors typically expect founder shares to vest.

Is a founder agreement legally binding?

A signed founder agreement can be a binding contract, but its key terms are usually implemented in formal company documents such as restricted stock purchase agreements, IP assignment agreements and bylaws. Those documents are what investors usually review. We would have a startup lawyer draft or review them so the terms are enforceable in your state and consistent with each other.

What happens to equity if a co-founder leaves?

A departing co-founder usually keeps their vested shares, and the company can repurchase the unvested shares, which Cooley GO describes as typically priced at the lower of cost or fair market value. The exact outcome depends on the vesting schedule, any acceleration terms and the repurchase rights in the stock purchase agreement you signed.

Sources

Disclaimer: This guide is for general education only and is not legal, tax or investment advice. Laws, market data and program terms change, so it may not reflect the latest developments or fit your situation. Treat it as a starting point, not a source of truth, and talk to a qualified lawyer, accountant or financial adviser before you make decisions.