Co-founder guide · 2025

Co-founder agreement for Indian startups.

Most co-founder disputes could have been avoided with a written agreement signed before things got complicated. Here's what yours needs to cover — and the conversations you should have before signing anything.

Quick answer

A co-founder agreement in India must cover equity split, vesting schedule with cliff (typically 4 years with a 1-year cliff), roles and decision-making rights, IP assignment to the company, what happens if a co-founder leaves, dispute resolution, and exit triggers. Without written vesting, an early co-founder departure can leave a non-contributing partner holding their entire equity stake.

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What should co-founders discuss before signing an agreement?

A co-founder agreement forces four conversations that most founding teams avoid until it's too late. Have them now, while everyone is aligned.

What happens if one of us wants to leave?
Covered by vesting + good-leaver/bad-leaver clauses.
Who owns what we've already built?
Covered by IP assignment from each founder to the company.
Who makes the final call when we disagree?
Covered by decision-making and tie-breaking clauses.
What if we raise money — how does equity change?
Covered by anti-dilution expectations and cap table structure.

What to include

What must every Indian co-founder agreement include?

1
Equity split — and why you decided on it
Write down the percentage each founder owns, and briefly why. This prevents revisionism later. Equity conversations are easy now, much harder after you have traction. Even equal splits should be documented.
2
Vesting schedule for all founders
Every founder — including the one who "came up with the idea" — should have vesting. Standard: 4-year vesting with a 1-year cliff. This means if a founder leaves in year 1, they get nothing. If they leave in year 3, they keep 75%. This protects you and your investors.
3
What each founder is responsible for
Define roles: who owns product, who owns sales, who owns tech. Not to constrain anyone permanently, but to set clear accountability from day one. Overlapping ownership without clarity is a recipe for resentment.
4
What happens when a founder leaves
Cover two scenarios: (a) Good leaver — founder leaves for legitimate reasons, keeps vested equity. (b) Bad leaver — founder is removed for cause, surrenders some or all equity. Without this, a co-founder who disappears can still hold significant equity and block decisions.
5
How decisions are made
Day-to-day decisions can be made by each founder in their domain. Big decisions — raising money, hiring key people, pivoting — require all founders. Define what counts as a major decision and how you vote.
6
IP assignment to the company
All founders must assign IP they've created — before and during the company — to the company. Investors will require this. Without it, a founder who leaves could argue they own the product they built.
7
Confidentiality and non-solicitation
Founders agree not to share company information outside and not to solicit employees or customers if they leave. Non-compete clauses are largely unenforceable in India — focus on confidentiality and non-solicitation instead.
8
How to resolve disagreements
When two founders disagree strongly, what happens? Define a process: first try to resolve between yourselves, then bring in a neutral advisor, then arbitration. Having a process prevents deadlocks from becoming company-ending events.

How does co-founder equity vesting work?

Say you and a co-founder each own 50%. You both agree to 4-year vesting with a 1-year cliff.

If co-founder leaves atThey keepWhy
6 months0%Before the 1-year cliff
1 year12.5%Cliff vested (25% of 50%)
2 years25%Half of their 50% stake
4 years50%Fully vested

What to avoid

What co-founder agreement mistakes have ended real startups?

✗
Skipping the agreement because 'we trust each other'
Every founder dispute starts with two people who trusted each other. The agreement isn't about distrust — it's about having a shared understanding of the deal while everyone is still aligned. Writing it down when you agree makes it much easier to reference when you don't.
✗
No vesting — and then a co-founder leaves early
Without vesting, a co-founder who leaves after 6 months keeps their full equity. You're then building the company with a departed co-founder holding 30–40% who contributes nothing and may need to be bought out before a funding round.
✗
Equity split decided over a WhatsApp message
Not documented, not signed, remembered differently by each person 18 months later. "I thought we said 60-40" vs "I thought we said 50-50." Document the split in writing, with both founders signing.
✗
No IP assignment from founders to company
If the CTO built the product before the company was incorporated, and there's no IP assignment, the CTO personally owns that IP — not the company. Every investor's lawyer will catch this. Fix it with a founders' IP assignment agreement before raising.
✗
Roles so vague that everything is everyone's responsibility
The most productive early-stage teams have clear ownership — not because it's rigid, but because it reduces the negotiation overhead of every decision. Define domains. Cross-domain decisions need discussion; single-domain decisions don't.

Related guides

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FAQ

Common questions

Yes. A signed co-founder agreement is a binding contract under the Indian Contract Act. It's also the document investors will look for to confirm that equity, vesting, and IP are properly structured.

For pre-funding, pre-incorporation discussions — yes. Once you incorporate (typically as a Private Limited company), you'll also need a shareholders' agreement that mirrors these terms. The co-founder agreement sets the foundation; the shareholders' agreement formalizes it at the company level.

There's no single right answer, but consider: contribution of capital, time, and IP. 50-50 splits are common and clean. If one founder is part-time, asymmetric splits make more sense. Whatever you decide, write it down and add vesting.

Vesting means founders earn their equity over time rather than owning it all upfront. Standard: 4-year vesting with a 1-year cliff. This means if a co-founder leaves in the first year, they get nothing. If they leave after 2 years, they keep 50%. It protects the company (and the other founders) from someone leaving early and keeping a large equity stake.

Depends on vesting and the good-leaver/bad-leaver clause. Vested equity is typically kept. Unvested equity goes back to the company's pool. Bad leavers (removed for cause) may forfeit some or all of even vested equity depending on the agreement.

For early-stage startups before funding, a well-structured template covering the key terms is a practical starting point. Before you raise a round, have a lawyer review both the co-founder agreement and any related shareholders' agreement.

Yes, with the written consent of all founders. Changes to equity require an amendment to the agreement and, after incorporation, changes to the company's cap table. Don't do this verbally.

A co-founder agreement governs the relationship between founders — equity, roles, vesting, exits. A shareholders' agreement is a formal company document that governs shareholder rights more broadly (including investors). You'll need both eventually; the co-founder agreement is the starting point.

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