Cofounder Questionnaire for Corporation Formation

Please answer each question to the best of your ability; don’t stress if you do not know the answer. Where options are given, select your preferred choice. Where open-ended, provide your thoughts and we’ll refine later together. Typical or market-standard examples are provided where appropriate.

1. Basic Information

Be sure to include an appropriate suffix (options are Association, Club, Company, Co., Corporation, Corp., Foundation, Fund, Incorporated, Inc., Institute, Limited, Ltd., Society, Syndicate, and Union).
We typically authorize 10,000,000 common @ par value $0.00001 per share at formation.

2. Bylaws and Corporate Governance

An odd number of Directors avoids deadlocks due to tie votes. Having said that, if deadlocks are a problem in the early stages of a company, perhaps the cofounders are not strategically aligned.
(list all names and addresses – will not be disclosed publicly)
For other, completely arbitrary. You can name as many as you like.

3. Cofounder Stock

(This defines how much stock each founder will receive at the outset. Typical options: equal split, or based on contribution, skill set, or expected future role.)
(Vesting determines when founders fully own their shares. Standard is four-year vesting with a one-year cliff (25% after year one, then monthly/quarterly). Custom schedules may be negotiated. No vesting is appropriate for anyone who is purchasing their stock with money.)
(Acceleration clauses speed up vesting. Single-trigger: full vesting on acquisition. Double-trigger: full vesting on acquisition followed closely by termination without cause.)

(In Sections 3.d through 3.f , “Forfeited” means company retakes the stock without paying anything; “None” means the cofounder keeps the stock; “At cost” means the company buys the stock back for whatever the cofounder paid for it; “FMV” means the then-current fair market value of the stock (what an investor would pay); and “Book value” means the 409A valuation (the price at which the company would issue stock to insiders). Note that unvested stock will nearly always be “Forfeited”).

(Specifies how and when profits will be distributed. Most startups reinvest cash. Other options: periodic dividends or ad hoc payouts.)

4. Intellectual Property & Confidentiality

(Ensures all intellectual property created by the founders related to the business is assigned to the company. In rare cases, a cofounder may merely license pre-existing IP to the company.)
(Founders agree to maintain the confidentiality of company information. Rarely omitted.)
(Prevents founders from competing with the company or soliciting employees/clients after leaving. Typical limits: 1–2 years within a reasonable geographic scope.)

5. Founder Roles, Compensation, Employment

(Clearly define each cofounder’s role and decision-making authority to avoid conflicts.)
(Often difficult to muster until funding.)
(If founders loan money to the company, terms should be set: interest, repayment, and whether loans may convert to equity or always be repaid.)

6. Shareholder Agreement Terms

(These limit how and when shares can be sold or transferred. Commonly includes Right of First Refusal (ROFR) for company or other founders, or requiring Board consent to sell to anyone else.)
(Co-Sale (Tag-Along) allows other shareholders to join an approved sale of stock in proportion to their holdings.)
(Allows majority shareholders to force minority holders to join in an approved stock sale, ensuring clean exits.)
(Existing shareholders can purchase stock to maintain pro rata ownership in new issuances.)
(Mechanism for resolving disputes or deadlocks if good faith discussions fail.)
(Specifies how the shareholder agreement can be changed.)