4 Written Agreements Before Finding a Cofounder

#Why This Starts Before the Search, Not Just Before the Contract

A founder holds two simultaneous legal statuses: shareholder (voting rights and property rights) and officer/employee (work performance and compensation). These are legally separate — which means that without a specific agreement, shareholder status and equity survive even after someone leaves the company.

Once someone joins the team and sits at the negotiating table, they're already expecting equity. If you only said 'I'll give you equity' verbally before they joined, adjusting those terms afterward is far harder — legally and psychologically. Before the offer is the only moment when terms can be negotiated on equal footing.

#1 — Role Separation and Decision Authority

Each cofounder's responsibilities (marketing, accounting, HR, business planning, R&D, IT, etc.) must be specified in writing to establish clear role separation and accountability. Decide together who can make which decisions unilaterally, and which decisions require mutual agreement.

An even-numbered board can create deadlock where nothing passes, so an odd number is recommended. In a 50:50 equity setup, deadlock-breaking mechanisms — put/call options or referral to a professional arbitration body — should be built into the shareholder agreement in advance so there's an actual remedy if a dispute arises.

#2 — Equity Calculation Criteria

Equity stake directly determines operating control, profit distribution, and fundraising leverage. Base the split on initial contributions (capital, idea, technology, network), but document the specific items and their weightings at the time of agreement — otherwise 'I contributed more' disputes arise later.

Full-time commitment is a variable that can't be left out of equity calculation. Clawing back equity from a cofounder who participates part-time is legally difficult — the presence or absence of vesting and return provisions in the shareholder agreement is decisive.

#3 — Vesting Schedule

Vesting means full ownership of shares is recognized only after working for the agreed period. Without a vesting structure, a cofounder who leaves early retains their equity and can still influence decisions — and recovering those shares legally is very difficult.

Before drafting a contract, both parties need to agree in principle on the four items below. Handing over a draft contract without that prior agreement means the other person first sees the terms just before signing — and negotiating power tilts to one side.

1. Total vesting period: agree on the minimum duration you expect continued participation from each cofounder.
2. Cliff: the minimum tenure required before vesting begins; if someone exits before the cliff, no share ownership is recognized for that period.
3. Vesting unit: after the cliff, decide whether remaining equity vests monthly or quarterly.
4. Acceleration clause: decide in advance how any remaining unvested shares are handled in the event of an M&A or funding event.

#4 — Share Handling Upon Exit

Share handling on exit only becomes meaningful when designed alongside vesting. A buyback is the right for the company or remaining shareholders to repurchase a departing person's shares. Without it, a departed cofounder can retain equity, sell externally, or continue exercising voting rights.

Lock-up periods of 3–5 years are typical in practice. Deadlock resolution mechanisms — referral to a professional arbitration body or a share buyout — must also be specified in the agreement in advance so there's an actionable remedy when a real dispute occurs.

#How These Four Agreements Tie Into the Team Section of Your Business Plan

In government grant programs and investment reviews, the team section is never just a list of résumés. A team without clear role separation and decision authority is classified as a team risk. Reviewers ask about the equity structure and the rationale behind it — and if there's no vesting design, they conclude the team hasn't prepared for an exit scenario.

Before submitting a business plan, you should be able to answer all four questions below. Any question you can't answer points to a structural problem that needs to be resolved before — not after — you file the plan.

• Can you describe each cofounder's role in specific task units?
• Can you explain the equity distribution tied to specific early-contribution items?
• Is there a vesting structure in place, or a concrete plan to establish one?
• Can you explain how business continuity is secured if a cofounder exits?