Founders’ Agreement
A Founders’ Agreement is one of the most crucial documents for any startup. At Tax Pal Solutions, we help co-founders establish a legally sound foundation for their business by defining equity, roles, responsibilities, and exit terms right from the start. This ensures transparency, reduces conflicts, and builds investor confidence.
Why Do You Need a Founders’ Agreement?
A Founders’ Agreement acts as a blueprint for your business journey by:
- Defining equity ownership and protecting each founder’s contribution.
- Setting clear roles and responsibilities to avoid confusion.
- Establishing a structured decision-making process.
- Ensuring intellectual property (IP) rights stay with the company.
- Laying out exit, buyout, and dispute resolution clauses.
- Building investor trust with a legally valid and transparent document.
Key Components of a Founders’ Agreement
Below is a breakdown of the major elements included in a standard Founders’ Agreement:
| Component | Description |
|---|---|
| Equity Ownership | Defines shareholding percentage and vesting schedules for each founder. |
| Roles & Responsibilities | Allocates duties and authority among founders. |
| Capital Contributions | Details money, assets, or services invested by founders. |
| Intellectual Property | Ensures IP developed is transferred to the company. |
| Decision-Making | Outlines voting rights and authority on key business decisions. |
| Confidentiality | Protects sensitive company information from being disclosed. |
| Dispute Resolution | Specifies methods such as mediation or arbitration for conflicts. |
| Exit & Buyout Terms | Covers exit procedures and buyback of shares if a founder leaves. |
| Non-Compete Clause | Prevents founders from starting or joining competing ventures. |
| Dividend Policy | Clarifies how and when profits will be distributed among founders. |
Who Should Have a Founders’ Agreement?
- Startups with two or more co-founders.
- Entrepreneurs planning to raise external investments.
- Business partners developing a product, service, or intellectual property.
- Teams looking to ensure long-term alignment and fairness.
Required Information & Documents
To draft a comprehensive Founders’ Agreement, the following details are generally required:
- Full details of all founders (legal names, addresses, and contact info).
- Business plan or idea outline.
- Agreed equity split and vesting terms.
- Roles and responsibilities allocation.
- Details of intellectual property, if any.
- Contributions made (financial, services, or assets).
Founders’ Agreement vs Shareholders’ Agreement
| Aspect | Founders’ Agreement | Shareholders’ Agreement |
|---|---|---|
| Purpose | Defines startup’s foundation, roles, equity, and duties. | Governs rights and obligations of all shareholders. |
| Parties Involved | Only the company founders. | All shareholders (founders + investors). |
| Focus | Equity split, roles, responsibilities, IP, and exit terms. | Share transfers, voting rights, dividends, exits, etc. |
| Timing | At the startup’s inception. | Generally during or after investment rounds. |
Cost of Drafting a Founders’ Agreement
| Service Type | Description | Approx. Cost (INR) |
|---|---|---|
| Basic Drafting | Standard agreement for 2–3 founders with simple terms. | ₹10,000 – ₹20,000 |
| Customized Agreement | Tailored for complex equity or multi-founder setups. | ₹20,000 – ₹40,000 |
| Legal Review Only | Reviewing & modifying an already prepared draft. | ₹5,000 – ₹15,000 |
| Consultation & Advisory | Financial/legal advice + drafting support. | ₹10,000 – ₹25,000 (per project) |
| Registered Agreement (Optional) | Includes stamp duty & registration fees (state-based). | ₹5,000 – ₹15,000 |
Why Choose Tax Pal Solutions?
At Tax Pal Solutions, we go beyond just drafting legal documents. We aim to create a fair, investor-ready agreement that secures the future of your startup.
- Team of MCA-certified experts in startup compliance.
- Successfully assisted 10,000+ founders across India.
- Expertise in equity structuring, IP rights, and dispute resolution.
- End-to-end support from drafting to registration.
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