Founders' agreement checklist: questions for your lawyer

Start with structure, because it decides which documents you need. A partnership is governed by the Indian Partnership Act, 1932, and partners usually record their arrangement in a partnership deed. If no duration is agreed, the partnership is a partnership at will, and any partner can dissolve it by giving written notice to the others. A limited liability partnership has an LLP agreement under the LLP Act, 2008. Where the agreement says nothing on a matter, the Act's default provisions apply, and one of them is that partners share capital, profits and losses equally. The agreement, and any change to it, is filed with the Registrar. A company is governed by the Companies Act, 2013 and its articles of association, and founders often add a separate shareholders' or founders' agreement on top. Ask your lawyer which structure and which documents suit the people in your team.

Next, ownership and roles. How will the business be owned, and how did you arrive at that split? Is it fair given what each person puts in, including time? Does everyone work on it full time, or does someone keep another job for now? Who leads on what, and who has the final word in each area? May a founder run or invest in another business? How will ownership and roles change if the business grows or someone new joins? Equal splits are common and are sometimes right, but they deserve an explicit conversation about commitment.

Then money. How much is each founder putting in, in cash or in kind, and when? Is it a share in the business, a loan or something else? When will anyone draw a salary, and who decides? Who can spend what without asking the others? If a loan needs a personal guarantee, who gives it, and what happens if it is called? Writing down founders' loans matters especially, because they are easy to forget and easy to dispute later.

Then decisions. Which decisions need everyone to agree and which can one person take alone? How does voting work with two founders, or with an even number? What happens in a deadlock: a cooling-off period, an outside adviser, mediation or arbitration? Choosing a way to settle disagreements when you are getting on well is much easier than improvising one when you are not.

Then the hardest part: vesting and leaving. Vesting means earning your share over time, so that someone who leaves after a few months does not walk away with the full share. Ask what happens if a founder leaves by choice, is asked to leave, stops contributing, falls seriously ill or dies. How is the departing founder's share valued, who can buy it, and how is it paid for over time? Is there any restriction on a leaving founder competing with the business, and, if so, can it actually be enforced? That last question needs a lawyer's view rather than a guess.

Then what each founder creates. Copyright in an original work generally belongs first to its author, with exceptions: for example, where a work is made in the course of employment under a contract of service, the employer is generally the first owner unless there is an agreement to the contrary. The Copyright Act, 1957 also says that an assignment of copyright is valid only if it is in writing and signed by the person assigning it. It should identify the work and the rights, duration and territory involved. If the period is not stated, the Act treats it as five years, and if the territory is not stated, as India. So a founder who wrote the first version of the software, designed the logo or drafted the website text before the company existed should assign it to the business in writing. Do not assume the business owns it. The same applies to the domain name and social accounts, which should sit in the business's name rather than an individual's.

Then confidentiality. What counts as confidential, who may see it, and for how long does the obligation last? It matters most for the customer list, pricing and any process or code that gives the business its edge.

Finally, make it official. Ask your lawyer about stamp duty on the agreement in your state, about any filing with the Registrar that applies to your structure, and about when to revisit the agreement: when a new founder joins, when an investor comes in, or when roles change. Keep signed copies where every founder can reach them.

A practical way to use this checklist is to sit down with your co-founders for two hours, answer each question separately first, and then compare. The differences are the useful part. Where you agree, write it down. Where you do not, you have found something worth settling now. Take the written answers and the open questions to a qualified lawyer, and let them draft the agreement. A checklist like this is where a good conversation starts, and it is not a substitute for that advice.