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When should you form a founders’ agreement and seek legal advice?

This question originally appeared on CoFoundersLabWhen should I form my Founders Agreement and should I seek legal advice?

Answer from Dimitry Rotstein, Founder, Miranor

 

I have three points to make that will help answer this question...

 

1. I've never spent any money on a founders’ agreement. I did ask a few lawyers and they wanted something between $1,000 and $4,000 for it. Given the number of co-founders I've had over the years, I'd be bankrupt if I agreed to those fees. Instead of paying a lawyer, I found ready-made templates and adapted them to my needs. It took me something like 10 hours each time I made an agreement and went over the terms with the co-founders, including back-and-forth revisions.

 

2. I don't recall ever receiving formal legal advice on this matter. Here's my take on this, based on what I know and have experienced (this is not meant to be legal advice).

You do not need to get professional help to make a founders’ agreement before your business has substantial revenue or a round of investment. If and when these conditions are met, then you could have a lawyer go over the agreement. In other words, you could consider only spending money on legal advice when it's a small portion of REAL money that your business is making and needs to have protected.

 

3. Typically, when I’ve added a new team member (or become one), I’ve started with a basic trial period of two to three weeks for that person or myself. The agreement template for such a trial is fairly short.


It should immediately specify in writing (email is fine) language such as: "We agree to work together on this project until [Insert Date]. If on this date or earlier we unanimously decide to continue working together, then we will sign a full founders’ agreement. Otherwise, we will go our separate ways with no further obligations or claims of liability from one side in this agreement to the others."

 

Again, the above language is not legal advice. It is merely wording that I have used in past agreements.

 

A separate non-disclosure agreement and non-compete clause may be signed in addition to  the above agreement, though I don't normally request for or enter into them at this early of a stage. Once a trial period has ended and I’ve decided to continue on with my partner(s), I’ve written the founders’ agreement shortly after and informed the other parties that the trial period is extended until they have signed the full founders’ agreement.

 

When should I form my Founders Agreement and should I seek legal advice? originally appeared on CoFoundersLab — the place to connect, meet, and collaborate with like-minded entrepreneurs.

 

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