Most co-founder disputes happen not because the co-founders didn't like each other, but because they never had a clear conversation about equity splits, roles, vesting, and what happens if one of them leaves. By the time the dispute surfaces, the company has value, emotions are high, and every conversation is now a negotiation over real money.

Having that conversation before the company has value is the only time it can be truly honest. No one is trying to protect a stake worth anything yet. The goal of a co-founder agreement — whether you call it a founders' agreement, or formalize it through a combination of a stockholders agreement and a vesting agreement — is to capture the deal you made with each other before the deal had consequences.

Here is what it needs to cover.

1. Equity Split

There is no formula for the right equity split. What there is: a set of factors to think through together. How much has each co-founder contributed to date — code, IP, customer relationships, capital, the original idea? What is each person's expected contribution going forward — and is that contribution realistically differentiated, or are you all doing roughly the same thing? What are the roles and responsibilities, and is one person taking a materially greater execution risk? What opportunity cost is each co-founder bearing?

Round numbers are fine. Equal splits between two co-founders are common and defensible. What to avoid: a 50/50 split among three or more co-founders, because any disagreement between two founders creates a deadlock the third cannot break. For three-person teams, something like 40/35/25 — skewed toward the person carrying the most risk or doing the most primary work — is a more functional starting point than equal thirds.

Whatever you decide, write it down and make it the baseline for everything else.

2. Vesting

Every co-founder must vest. Full stop. The standard is four years with a one-year cliff and monthly vesting thereafter. The cliff means that if a co-founder leaves in the first twelve months, they receive nothing — which protects the company from someone who walks away early and retains a significant minority stake. After the cliff, shares vest monthly so that each month of continued contribution is reflected in equity earned.

One practical nuance: if one co-founder built a meaningful prototype or contributed substantial work before the company was formally incorporated, it is reasonable to credit some of that pre-incorporation work as already vested. Maybe six months of credit at signing. This is a negotiation, and it should reflect the reality of what each person brought to the table before the first board meeting.

3. Roles and Decision-Making

Who is CEO? Who controls product decisions? Who manages the engineering team and who manages sales? These questions feel obvious until a company is under stress and two co-founders have different instincts about what to do next.

The agreement should designate roles and identify the categories of decisions that require co-founder consensus — fundraising rounds, hiring at the VP level and above, major product pivots, entering new markets — versus decisions each person can make independently within their domain. The point is not to create bureaucracy; it is to establish in advance that these are shared decisions so that no one is surprised when a co-founder expects to be consulted.

4. IP Assignment

Every co-founder must assign all startup-related intellectual property to the company. Not most of it. All of it. This means code written before incorporation, algorithms developed while working on the idea, any patents, trademarks, or trade secrets connected to the product.

A co-founder who wrote the core algorithm and did not execute an IP assignment agreement is a poison pill for investors. When a sophisticated investor does due diligence, the first thing they check is whether the company actually owns its technology. If the answer is unclear, the deal slows or dies. Execute IP assignment agreements at the same time you document everything else.

5. What Happens When a Co-Founder Leaves

This is the section people skip because it feels pessimistic. It is the most important section.

The agreement should specify whether the company — or the remaining founders — has a right to repurchase unvested shares when a co-founder departs, and at what price. For unvested shares, repurchase at original purchase price or par value is standard. For vested shares, the question is whether there is a right of first refusal: if a departing co-founder wants to sell, does the company or remaining founders get to buy those shares before they go to an outside party?

The agreement should also distinguish between a "bad leaver" — someone terminated for cause (fraud, gross misconduct, material breach of the agreement) — and a "good leaver" who simply decides to move on. Bad leaver provisions typically allow repurchase of vested shares at the lower of cost or current fair market value. Good leaver provisions are more generous. The specific line between the two matters; be explicit about what qualifies as cause.

6. Non-Compete and Non-Solicitation

A non-compete prohibits a departing co-founder from starting or joining a competing business for a defined period. A non-solicitation prohibits poaching employees or customers.

Enforceability depends on state law. California does not enforce non-competes against employees or founders in most circumstances — a fact that matters if you have California-based co-founders. Florida does enforce them, subject to specific statutory requirements around reasonableness of scope and duration. A Florida non-compete covering the actual business of the company, limited to twelve to twenty-four months and a defined geographic or product market, has a reasonable chance of enforcement. An overbroad non-compete that covers anything the departing founder might ever do is likely to be challenged and partially invalidated.

Non-solicitation provisions for employees are more routinely enforced than non-competes and are worth including regardless of jurisdiction.

7. Deadlock Resolution

What happens when two co-founders with equal board representation fundamentally disagree and cannot resolve it? This is the hardest provision to write and the one most co-founder agreements skip. That is a mistake.

Options include: a mandatory mediation requirement before either party can pursue legal action; a buy-sell provision (sometimes called a "shotgun clause") that allows either co-founder to set a price at which they will buy the other out — and the other must either sell at that price or buy back at the same price; or a provision allowing either co-founder to trigger a company sale if deadlock persists beyond a defined period. None of these are comfortable to include in a founding document. They are essential.

The Practical Takeaway

The co-founder agreement is the one legal document founders consistently undervalue until they wish they had it. It is not a sign of distrust to put the terms of your relationship in writing — it is a sign that you have thought seriously about building something together. The founders who have this conversation early, and get it documented, can spend their energy on the company instead of on each other when things get hard.

The right time to have this conversation is before you have built anything worth fighting over.