A Founders Agreement Template for a Business You Already Started

Eighteen months in, the first real term sheet lands, and the investor's associate emails: "Can you send over the cap table and your founders agreement?"

Say Marcus turns to Priya and says, "We're fifty-fifty, right?"

And Priya doesn't answer straight away. Because in her head it stopped being fifty-fifty around month four, when she covered payroll out of her savings and he was still doing three days a week at his old job. She never said anything, because saying something would have been a fight, and they were busy.

Neither of them is lying. They have both been telling themselves a story for a year and a half, and the stories were never compared. Now a stranger with a term sheet is forcing the comparison, at the worst possible moment, with money on the table.

This is the situation almost no founders agreement template is written for. Every one you'll find online assumes you're at day zero, incorporating clean, splitting a company that has done nothing yet. You need a founders agreement template for a business you already started, which is a different document: it has to record a past, not just plan a future.

What happens to your equity if you never signed a founders agreement?

You already have an agreement. You just didn't write it, and it probably splits everything down the middle.

In the US, two or more people carrying on a business for profit as co-owners form a general partnership automatically, with no filing and no signature required. Under the Revised Uniform Partnership Act § 401, each partner shares equally in profits regardless of who put in more cash or more hours. In the UK, section 24 of the Partnership Act 1890 does the same thing. So if Priya put in £38,000 and Marcus put in £0, the default answer to "what do I get back" is: the same as him.

That default comes with unlimited personal liability for both of you, which is the part people find out about later.

There's a second problem, and it kills more deals than the equity split does. Without a written assignment, intellectual property belongs to the person who created it. The prototype Marcus wrote on his old laptop while employed elsewhere is, on paper, his (or possibly his former employer's). Diligence will find this. It is a standard checklist item, and it is the reason clean-up agreements get signed at 11pm the night before a closing.

Can you write a founders agreement for a business you already started?

Yes, and it is a normal, routine thing to do. What you must not do is back-date the signature.

Sign today, with today's date, and give the agreement an earlier effective date plus a recitals section describing what actually happened. Something like: "The parties have jointly operated the Business since 3 March 2023. This Agreement records their prior understandings, and where those understandings differed, resolves them, with effect from that date."

That single paragraph does the work. It tells a future investor, a future court, and a future version of you that the arrangement predates the paperwork, without pretending a document existed when it didn't. Forged dates are fraud, they are easy to catch in email metadata and bank records, and they turn a fixable governance gap into a reason to walk away.

How do you split equity for work already done?

Separate the past from the future, and price them differently. Past contribution buys a fixed slice, now. Future contribution vests.

The way to price the past is boringly arithmetic, and the arithmetic matters less than the fact that you both watched it happen. Build a ledger with agreed numbers for each of these:

Run it through. Say you agree a notional salary of £60,000, so a full-time month is worth £5,000 of sweat credit and a two-days-a-week month is worth £2,000. Priya: £38,000 cash plus 14 months full-time equals £108,000. Marcus: 14 months at two days plus an agreed £15,000 for the prototype equals £43,000. That's roughly 71/29 on the past.

That is not your cap table. That is your split of the past. Decide together how much of the founder equity the past should buy: allocating 20% to 40% of the founder pool to historic contribution and vesting the rest forward is a defensible place to land, and it stops one person's early cash from permanently outweighing the next four years of somebody's life.

What do you do about the things you never agreed on?

Stop trying to remember, and decide instead. "We never actually agreed this" is a legitimate entry in the document, and it is usually the honest one.

The recurring gaps, in roughly the order they cause damage:

• Was the founder cash a loan repayable before any distribution, or did it buy equity?
• What happens if one of you takes a salaried job elsewhere and goes part-time?
• Who owns the domain, the company Stripe account, the GitHub org, and the client relationships?
• If someone leaves at month 20, what do they keep?
• Who decides when you disagree, and on what categories of decision?

The conversation goes badly when it starts as a negotiation. It goes better when each of you writes your own version privately first, because you find out that the disagreement is narrower than the dread suggested. Priya writes "I always assumed the £38k was a loan." Marcus writes "I always assumed that money bought your extra ten points." That's one issue, not a broken relationship, and it's solvable in an afternoon. Tools like Servanda give cofounders a structured way to put those separate accounts side by side and turn the differences into written terms, which is useful precisely because the version you say out loud to each other is always softer than the one in your head.

How does vesting work when you've already been at it two years?

Back-date the vesting start date to when the work actually began, keep the standard four-year schedule with a one-year cliff, and accept that a chunk is already vested on the day you sign.

If you started in March 2023 and sign in September 2024, that's 18 months of a 48-month schedule, so roughly 37.5% has vested for each of you. Both of you are past the cliff, so nobody is sitting at zero. That is the correct outcome. You did the work.

Investors accept credited time. What they push back on is a founder claiming to be 100% vested at the point of investment, because it removes every incentive to stay. The usual landing spot is credit for time served plus re-vesting of some portion, often 25% to 50% of each founder's stake, over two to three years from closing. Agree your position on this before the term sheet, not during it, because negotiating your split with your cofounder while also negotiating with an investor is how people sign things they resent for a decade.

What goes in the document

Eight things, and it should fit in ten pages:

1. Effective date and recitals covering what happened before signing
2. The equity split, with the past-contribution ledger attached as a schedule
3. Vesting terms, with the back-dated start date stated explicitly
4. IP assignment from each founder to the company, covering work done before incorporation
5. Roles and decision rights, including which decisions need both of you
6. Treatment of founder loans and expenses already incurred
7. Leaver provisions: good leaver, bad leaver, what each keeps
8. What happens in deadlock, named mechanism, not "we'll discuss it"

Get it reviewed by a lawyer before you convert it into share issuances. But a signed imperfect agreement beats an unsigned perfect one every single time, and the version that never gets finished is the one that waits for the lawyer first.

Here is what to do this week. Separately, without conferring, each of you writes one page: start date, cash in, hours worked by period, and what you believed had been agreed about equity. Trade the pages on Friday and read them before you speak. The gap between those two pages is your actual agenda, and it will be shorter than you fear. Don't open a template until you've read each other's page.