Amid their lofty dreams entrepreneurs, trademark owners, tech startups, or local business owners share an essential desire, quality relationships, particularly co-founder relationships. We are friends, why do we need legal cofounder agreements? But if your goal is to become a successful entrepreneur, developing a strong foundation is essential. Cofounder legal agreements may seem unnecessary at the beginning, but without this legal document, your business may be doomed for chaos, the chaos that could have been avoided if the startup had hired a law firm experienced in company formation for startups.
COFOUNDERS DUE DILIGENCE
As a business owner, you may have done your due diligence and realized attaching a cofounder has many pitfalls. Cofounder agreements need a legal paper trail to be legally validated in a couple of years. Yes, you can lose all and complete ownership of a startup you invested years into without if you don’t have the legal documents.
This video clip in The Social Network (2010) reveals the downside of not having sufficient legal documents to protect your intellectual property, the Winkelvoss twins furiously demand ownership of Facebook in a courtroom battle for intellectual property rights over Facebook without victory. And Mark faces another legal dispute by his cofounder who claimed he was being kicked out of the business.
Similarly, the off-camera cofounder relationship between Mark Zuckerberg and Eduardo Saverin illustrates the lawsuit galore that can result from not having an experienced lawyer on your team when starting your business. Although Eduardo Saverin was able to salvage the “cofounder” title after the dispute settled, Mark attempted to dilute his stakes, also known as stock dilution, invalidate stock-purchase agreements, and ensure Eduardo Saverin lost his co-founder title.
Because you don’t want to lose complete ownership of the business you poured months, years, or decades into you need to avoid horror stories of cofounders backstabbing, money laundering, and potentially facing multiple lawsuits.
“Co-founder disputes are the number one early startup killer,” states Gary Tan in a video about his distressing experience with a startup he co-funded but ultimately quit and lost ownership of because of conflict dynamics. Although attaching a co-funder may seem like just another relationship with a good friend, it is not.
The cofounder’s legal disputes are completely avoidable. Any entrepreneur looking to incorporate a co-funder in their startup business should consult with an experienced startup corporate lawyer before taking action. While taking this subject casually may seem like an attractive option at the beginning, incorporating this service can lead to problems that could have been avoided if the startup had hired a law firm experienced in co-founder startup agreements for startup entrepreneurs.
BUSINESS LEGAL PROTECTION
No matter how much research you do on other people’s startup tech experience, only an experienced intellectual property attorney, knows the Venture Capital landscape and can advise on equitable fair terms for cofounders agreements such as stock equity splits, company valuation, growth, and scaling strategies, vesting schedules with or without cliffs and other terms of the relationship.
Attaching a co-funder is no simple task, there are many dos and donts that only a knowledgeable lawyer can help you do the right way. All brand and business owners are well-advised to consult with an experienced marketing trademark attorney and intellectual property law firm in Los Angeles, New York, Atlanta, Miami, or Dallas, before launching into a cofounder relationship and saying yes to any agreements.