Audit equity vesting, deadlock breaking mechanisms, buy-sell triggers, and restrictive covenants before co-founding.
These common clauses routinely slip past non-lawyers and expose organizations to six-figure liabilities.
Awarding 50/50 upfront shares with no 4-year vesting or 1-year cliff, allowing a co-founder who leaves after 2 months to walk away with half the company.
Equal voting control without a designated tie-breaker, advisory board casting vote, or shotgun buy-sell clause, leading to corporate paralysis.
Obligating partners to personally inject cash upon majority demand, under threat of severe equity forfeiture if unable to pay.
Forcing departed founders to surrender vested equity at nominal book value rather than fair market valuation.
Immediate unearned equity vesting, total paralysis risk on 50/50 deadlocks, and unconscionable nominal equity forfeiture.
Adopt a 4-year vesting schedule with 1-year cliff and double-trigger acceleration, insert a shotgun buy-sell dispute resolution mechanism, and compensate fair market value for vested shares.
Answers to legal and operational questions about risk detection and protection.
Standard 4-year vesting with a 1-year cliff ensures equity is earned through sustained contribution. If a founder departs early, the unvested equity is recovered by the company.
Include a mediation escalation process followed by an independent advisory board tiebreaker, or a Texas/Russian shootout buy-sell procedure.
A partner offers to buy out the other at a specific price per share. The other partner must either sell at that price or buy out the offering partner at the exact same price.
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