Co-founder Memorandum of Understanding

http://msabundle.com/products/co-founder-memorandum-of-understanding

by obiefernandez • 14 years ago

13 18 14 years ago

Hi everyone. I've been successfully selling my document templates for the last two years. This is the first one that I think might be of real interest to the HN crowd. The original version came about because I was the founder of a startup and was bringing on an acquaintance as CTO whom I didn't fully know. And frankly, we didn't fully trust each other, so we wanted to find a way to protect our interests if things didn't go exactly as planned.

The result was this agreement, which although titled Memorandum of Understanding (aka Letter of Intent) forms a legally-binding contract upon execution. It helps to prevent co-founders from "screwing each other" over by stating exactly what will happen prior to the legal formation of the new venture. In fact, that saved me a lot of grief. My prospective new partner and CTO did not work out. She quit right before we incorporated and opted to take a payout as a contractor. This was stipulated clearly in the agreement, so we were able to wrap things up cleanly without bitterness and maintaining protection for my valuable IP.

le_isms• 14 years ago

I think it's a very good idea to have something like this in place before you start pouring your soul into a project. That said, I would recommend that any potential co-founders go and consult a lawyer instead of purchasing a template, since your particular situation may differ and a template might not cover all the bases or hold up in court.

obiefernandez6• 14 years ago

You should definitely talk to a lawyer, but it's worthwhile going to them _with a draft document already in place_ -- especially if you are starting with one that has been proven for its purpose. Otherwise you may end up paying them to whip one up from scratch that won't be as good. It will cost you much more than the template, trust me.

SatvikBeri• 14 years ago

I have paid a lawyer to create a document from scratch that ended up worse than what I found for free online. So I highly recommend obiefernandez's approach of meeting your lawyer with a template in hand as a starting point.

taybin• 14 years ago

"contains non-binding language that allows you to specify how equity split in the new venture is planned"

If it's non-binding, what's the point?

obiefernandez6• 14 years ago

The details of the equity split are the only parts of this agreement that are non-binding, because they are complex and will usually be couched in boilerplate language as part of the incorporation process. Still, I think it is better to put this information in writing even if it's non-binding because it helps to prevent misunderstandings in the future.

joshowens• 14 years ago

Interesting, I would have never thought to do this.

lfittl• 14 years ago

A similar template (although free) by Seedcamp & Brown Rudnick, mostly for covering IP rights and equity distribution + vesting: http://www.seedcamp.com/2011/09/seedhack-founders-collaborat...

Direct PDF link: http://www.seedcamp.com/main/wp-content/uploads/2011/09/Seed...

casca2• 14 years ago

I had to look more at the site to understand the context so here's my summary if it helps anyone. msabundle.com is the website of the poster and has 3 legal agreements. Obie says that he's a professional software developer and has written bestselling books on RoR.

I'm unfamiliar with Obie but would be cautious about buying legal documents from a non-lawyer. It's not clear who drew up these contracts or what jurisdiction they would apply to. $79 for a good MoU is potentially very good value so this could be great, but there's not enough info here for me.

obiefernandez6• 14 years ago

Hi, I'm the poster. The idea is not to replace your lawyer, but to save you money by giving you a draft agreement to take to your lawyer for review, feedback and ultimate approval. This approach will definitely save you money and hassles since most lawyers are expensive, and many of them don't have specific experience with software business topics.

casca2• 14 years ago

Hi Obie,

I can certainly see where this might be very useful, but it should be clear where the limitations are. Having a good legal document can make a huge difference.

batgaijin• 14 years ago

Yeah, this is on the front page with 10 clicks?

There is no preview, no reviews, and no backstory?

Seems spammy as heck to me.

fedesoria• 14 years ago

Looks great, certainly some points in there that anyone thinking of a startup should go over.

rprasad3• 14 years ago

I hope you are not based in the U.S., because if you are, you are committing the unauthorized practice of law and face unlimited liability for malpractice arising from anyone's use of these documents.

Also, in many states, the unauthorized practice of law is a crime. A misdemeanor or regulatory offense in most states, but a felony in some. In many states, the authorities are empowered to seek all incomes from the activities deemed to be such practice of law.

EDIT: Obie appears to be based in Atlanta Georgia, so the above is applicable.

I regret to inform you (Obie) that unless you immediately stop referring to these documents as legally binding (i.e., on HN and at your Shopify store), I am ethically mandated to report you to the Georgia Bar Association (and the California Bar Association) for the unauthorized practice of law. You may refer to these documents as "samples" or "research materials for use with conferring with a lawyer" but you may not describe these documents as legally valid/binding/appropriate documents.

rprasad3• 14 years ago

Followup: to see examples of how this can be done, check out the Nolo line of books, especially the sample forms in the appendices. (Hint: use the word "sample" unsparingly.)

obiefernandez6• 14 years ago

Hey since you seem to know some more about this than I do, can we have an email conversation about it before you take any action? I certainly don't want to be breaking the law in any way and am happy to make changes to bring my product into compliance. I have many people that have been very happy to use these templates in the way that I've described -- I'm just trying to provide a valuable service to other hackers, this is not a huge money maker for me.

Co-founder Memorandum of Understanding

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