The Cost of Informal Agreements
In the excitement of launching a startup, co-founders often split equity 50-50 on a handshake without vesting schedules. When one founder departs six months later holding half the company, the startup becomes completely un-investable.
Non-Negotiable Legal Safeguards
Every founder must institutionalize three legal documents on Day 1:
- Founder Reverse Vesting Agreement: 4-year vesting with a 1-year cliff ensures equity is earned through active operational contribution.
- Proprietary Information and Inventions Agreement (PIIA): Legal assignment transferring all code, designs, and domain names from individuals to the corporate entity.
- Master Services Agreement (MSA) with Clear Limitation of Liability: Protecting the firm against outsized commercial claims.
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