A business creation contract is a legal contract concluded by the founders of a startup. It can cover everything involved until what happens when someone leaves. This is a legally binding contract and should be established at the beginning of the company`s life cycle in order to put everything on the table before a group of co-founders join forces. In the home blog post “8 Issues You Need to Discuss with Your Co-Founder” on CoFoundersLab, David Ehrenberg (CEO of Early Growth Financial Services) outlines several concerns that co-founders need to address before starting a business together. Here are some of the most important ones that are categorized by theme: “When you`re starting a business for the first time, it`s easy to give up an operational co-founding agreement or other technical details in favor of dreams and aspirations,” writes Meghdad Abbaszadegan, founder of Free Fall. Only when you succeed will money and greed come into play. Entrepreneurs stop thinking about the vision of their businesses and start thinking about themselves. When my co-founder and I were victims, Feel Free went from a success to a nightmare. However, we have gathered the best opinions from high-level startup experts to ensure that you and your partner are in line with your goals and that you are building a strong co-founding relationship for your business. Investing is a way to protect yourself in such a situation. It is based on the term “sweat equity”, in which founders must reach certain milestones before benefiting from equity.
The unshakability of actions is often done according to a certain period of time, but can also be done according to certain stages or events. The agreement must also impose restrictions on co-founders with regard to the transfer of their shares to third parties. This means that the agreement must indicate the lock-in period for which the founder cannot transfer the shares of the company that belong to him. The clause also includes the remedy that can be invoked when the co-founder of the clause is also formed of the legal proceedings that can be invoked if the co-founder violates this clause. “I started a company with four founders and we didn`t define roles,” writes Jason Lengstrof, an expert in remote work. “What happened in the end was that one person didn`t do anything they weren`t interested in, one person started a number of tasks and left them half ready for someone else to accomplish, and one person could only do process-based work, leaving it to the fourth person (me) to do everything else (and write down the processes). It created resentment and made it very difficult to adapt the turnover in the future, because it was found that I could do anything and that is why I became the last point of responsibility, even if later we had defined new roles. Our only way out was to sell the business. Even if you run a narrow ship of a small business, not all decisions should be left to each co-founder.
Even though it may seem the opposite, especially if you`ve just started your business. Here you determine the percentage of each member`s business, i.e. You and your co-founders. This figure can change when people join and leave the company. If your business is an LLC, you also need to determine the percentage of management interests of each member. This means that you need to determine if each person is just an owner in the economic sense of the term or if they also play an active role in management. What salaries are founders entitled to (if any)? How can this be changed? Every founder of your startup has helped become a founder. This contribution could be cash, property, services provided, a debt instrument or a combination of those mentioned above or even a commitment from one of them. . . .