Countless times, I have seen business owners co-founding a business with their family members, friends, or religious associates without clearly defining the legal rights and obligations of co-founders and stakeholders at the early stage. A friend once told me that he started a business with his twin brother who later converted all the business assets claiming that he solely owned the business. And guess what? He had no agreement to show that they jointly owned the business.
In my years of experience, I have seen people gifting shares to their family members or religious associates for no just cause. Most times when such businesses grow into large corporations, they are often torn apart by terrible conflicts that occur when one of the parties starts trying to extract more than his fair share.
You can imagine if Mark Zukerberg had gifted 20% shares in his company to a family member or friend? Can you imagine how much the shares will be worth now? Every startup must have a share holder’s agreement detailing the share structure and how each shareholder can deal with the shares.
A startup must also have a Co-founders agreement detailing the rights and duties of the founders, just as a partnership agreement is not negotiable in the case of a partnership. This will go a long way to reducing possible co-founders’ conflict in the long run.