What to Know Before Signing a Partnership Agreement
Key points to check in partnership and co-founder agreements so you're aligned on roles, equity, and exit.
Partnership and co-founder agreements set out how you and your partners will work together—roles, equity, decision-making, and what happens if someone leaves or the partnership ends. If you don't nail these down early, you can end up in disputes about who owns what, who does what, or how to split things if you go separate ways. Here's what to know before you sign a partnership agreement.
Roles and responsibilities
Who does what? The agreement should describe each partner's role and responsibilities—even if it's high-level. That helps avoid overlap and gaps. It should also say how decisions are made: unanimous, majority, or certain decisions require consent of all. If one partner has a casting vote or final say on certain matters, that should be in writing. And what happens if someone isn't pulling their weight? Is there a process to address that—or to buy them out? Get it in writing.
Equity and vesting
How is equity split? Is it fixed (e.g. 50/50) or does it vest over time? Vesting is common for co-founders: you earn your equity over time (e.g. 4 years with a 1-year cliff), so if someone leaves early, they don't walk away with a full share. That protects everyone. The agreement should say: (1) initial split, (2) vesting schedule (if any), (3) what happens to unvested equity if someone leaves (e.g. company buyback), and (4) what happens to vested equity if someone leaves (e.g. right of first refusal, drag-along). If you're not vesting, understand the risk: a co-founder who leaves in year 1 might keep 50% forever.
Exit and dissolution
What happens if the partnership ends—someone wants out, or you shut down? The agreement should cover: (1) how someone can leave (notice, buyout process), (2) how equity is valued for a buyout (e.g. formula, third-party valuation), (3) what happens to the company if you can't agree (e.g. shotgun clause, mediation), and (4) what happens to IP, clients, and assets if you dissolve. These are hard conversations, but having them upfront—and in writing—saves a lot of pain later. BeforeYouSign can highlight roles, equity, vesting, and exit language in your partnership agreement so you know what you're agreeing to before you sign.