Founders Agreement

Founders Agreement

The founders agreement definition, more commonly known as a shareholder agreement, is a written document that describes the distribution of equity among the firm's founders and the length of time that must pass before the shares fully vest. It also includes the responsibilities and roles of the founding members, their invested equity, their various undertakings, and their projections and goals. A founders agreement is drafted during the initial incorporation of the business.

The purpose of a founders' agreement is to avoid any ambiguity that might develop in the future in regards to the company's management and business relations between founders. The agreement identifies potential complications and risks and provides provisions to deal with them should they arise. As a legally binding document, it must be detailed and lack any loopholes that may be exploited later. It is always a good idea to draft a written agreement after seeking an expert's counsel regarding the business's requirements and intentions.