Shareholder agreements · Founder Agreement

How to develop a great Shareholder/Buy-out Agreement?

Justin AP CEO at EcoCosm, Inc.

August 17th, 2015

My Co-founder and I have developed our business using only a two sentence shareholders agreement and trust for the last four years.  Now we plan to take on a minority partner to run operations and also want to make some equity available for a future business development person.  We're looking for resources/suggestions from the group to help us get a jump-start on creating an agreement.  We've talked with a Lawyer and are looking to keep our costs down.  Also, are there any pitfalls to watch out for or things we should definitely include?

Diane Stokes Executive Consultant at Spartan Race, Inc.

August 17th, 2015

If I were you, I would not skimp in this area. Having a solid contract could be very important in later years. There were two areas I did not skimp on in the company I founded- legal issues and financial accounting issues!

Chris Murphy Director of Corporate and Legal Affairs at E2open

August 17th, 2015

I am not big at all on startups spending their limited funds on "standard" legal agreements if they have a "standard" business.  That said, THIS is not one of those agreements to try and DIY.  The ramifications can be immense, and this is a classic one to be litigated and parsed in the extreme.  Just like in marriages, business partners drift apart, and it can be shocking what seemingly small sums of money will be fought over tooth and nail.  You don't need to break the bank on this (find a good local startup attorney and they should have a form you can start with that has all the generally important clauses included), but doing this particular agreement without an attorney is a very bad idea, imho.

Justin AP CEO at EcoCosm, Inc.

August 17th, 2015

Thanks for your input!  To clarify, we plan to use an Attorney to draft the final agreement and will invest as needed to have a good final product.  An Attorney will only have one perspective and our main interest is getting feedback from the group about their experiences, details we should be sure to include, issues that might come up, and vetted resources for more info.