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Introduction to the Co-Founder’s Agreement

A co-founder’s agreement is a legally binding document or contract which is used to outline the roles and responsibilities of the individual owners’ within the organisation and outside as well. 

This contract is basically in a written format and can be a standalone document. Another main importance of co-founder’s agreement is that it is designed to protect the rights and interests of each and every co-founder which ultimately would prevent the conflicts down the line. 

This valuation is necessary and important for each and every firm or any kind of a business entity. 


Need for a cofounder’s agreement

The following are the reasons why the cofounder’s agreement is required. 

It uniquely distinguishes each owner’s individual role in the business

It outlines a clear structure for resolving the disputes amonGST the founders

It clearly mentions when the partner would enter and exit the business. 

It tells the investors that this business is a serious one

It protects the minority owners of the business


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FAQ - Frequently asked questions

What is the need to make a founder's agreement?

The founder's agreement will restrict co-founders from engaging with other employment opportunities, even if they are relieved or ousted from the company.

Should the founder's agreement be notarized?

Yes, the founder's agreement has to be executed on non-judicial stamp paper for respective value and get notarized from the notary person, in order to make the agreement a legally enforceable one.

Is there any penalty for breaching the founder's agreement?

Yes, but it depends on the severity of the dispute! For example, the shares of the co-founder will be vested with the company if he violates or breaches the agreement.