Ask HN: Pre-Incorporating Founder Split | Hacker News Reader

Ask HN: Pre-Incorporating Founder Split

Hi,

If (this is mostly hypothetical at the moment) a startup has a pre-incorporation founder split, what kind of documents should you sort out to cover the future of the startup?

For instance, let's say that two founders have been developing a concept (mostly theoretical to date) and business plan. However, one founder decides they don't want to pursue the idea (let's say grad school comes up or something) but is happy for the other founder to continue with the idea.

I assume it's good to sign some documents saying that the leaving founder surrenders all claims to the startup, implementation ideas etc.? What about from a future competition standpoint too, would the surrender of rights to the ideas be enough to stop those ideas being used at a later date?

I'd love your thoughts.

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Here's what I'd do as a non-lawyer:

1. Write down the agreement you'd like to make in the plainest possible terms. Use simple English and structure the document logically. Cover all the bases -- what you want to happen now, and in the future. Describe your theoretical idea as best you can.

If you don't want each other to be able to compete in the future, write it down. But bear in mind that depending on where you are, you might not be able to force each other to agree to things like that.

2. I'm not a lawyer, but lawyers have told me to do the following things in agreements I've written: Describe which state's law covers the agreement in case you disagree about it later. Include the fact that the document is your entire agreement, and you don't have any other agreements on the subject outside of the document. Include something that says if any small part of the agreement becomes invalid for any reason (like the competition bit), the rest of the agreement is still valid.

3. Make two copies. Each of you sign and date both and keep one.

4. If you change your mind, make a new document that references your initial agreement (e.g., "this is an amendment to our agreement of Oct 8 2009") and spell out the changes in simple terms.

That's probably the best you can do without spending any money on a lawyer. Think of it this way -- if you have a disagreement in the future you want something you can point to and say "this is what we agreed to, it's very clear". Don't try to fancy it up too much.

Yeah sounds good. We get on well enough (now at least I guess I should say) that I can't imagine us pressing the intention of the document. But I figure it would be reckless to not protect the startup for the future. Thanks!

You're right -- and documents like this can help ensure that you continue to get on well. Good luck!

IANAL, but I have spoken to lawyers, and from what I gathered, if you want to be funded at some point it is important that you tidy up the intellectual property situation. You probably just need a paper that says that whoever's leaving did own the IP put into the start-up and that they're transferring all their rights to the company. Investors like to know that you own what you're selling...

Thanks

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