Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the Australian Legal Innovation Index and recently a winner of the LexisNexis 40 Under 40 (APAC).
If you’re starting a business with co-founders or multiple shareholders, three legal documents do most of the heavy lifting on day one: a shareholders agreement, an IP assignment, and a founder vesting agreement. Get these three in place early and you’ve covered the issues that sink most early-stage companies. Skip them and you’re trusting that nothing ever goes wrong between you.
Here’s the honest bit. Almost nobody wants to talk about exits, fallouts and who-owns-what while everyone still gets along. That’s exactly why it gets skipped, and exactly why it bites later. The good news: sorting it now is quick, cheap and mostly a one-time job. You can knock these over with the right legal document templates in an afternoon.
- Three legal documents cover most founder risk: a shareholders agreement, an IP assignment, and a founder vesting agreement.
- None of these are legally required. All three save you from disputes that are slow and expensive to fix once they’ve started.
- IP doesn’t transfer to your company automatically. Without a signed assignment, the founder or contractor who created it can still own it.
- Sort them while everyone’s aligned. Day one is cheap. Mid-fallout is not.
1. Shareholders agreement
A shareholders agreement is the private rulebook between the owners of your company. It sets out how big decisions get made, voting rights, how shares can be sold or transferred, what happens when a shareholder leaves, and how you settle a dispute before it turns into a war.
Why it matters: without one, you fall back on the default rules in the law, and they say almost nothing useful about buyouts, share valuations or deadlocks. The pattern we see again and again is the 50/50 handshake. Two people split a company down the middle, sign nothing, and it works fine until it doesn’t. When the relationship sours, there’s no agreed way for one to exit or value their shares, so a buyout that should take a fortnight becomes letters of demand and a solicitor on each side.
Put it in place at the start, while you all still agree on everything. That’s when it’s easy!
2. Assignment of intellectual property
An assignment of intellectual property transfers ownership of work and ideas to your company. Code, designs, branding, content, product concepts: whoever creates it usually owns it first, and that isn’t always the company.
This is the one founders get wrong most. People assume that because they paid a contractor or a co-founder built something “for the business”, the company owns it. It often doesn’t. We regularly see two traps. The first is the unsigned or “non-binding” agreement: if the document says it isn’t legally binding, its IP clauses have no effect, so you’re protecting nothing. The second is the contractor whose old templates and methods stay theirs, while only the specific deliverables they build for you transfer across. A clean assignment, signed as a deed, removes the guesswork and parks your IP where it belongs.
Get every founder, employee and contractor who touches your IP to sign one. Future investors will check for exactly this during due diligence.
3. Founder vesting agreement
A share vesting agreement makes equity earn out over time instead of landing in someone’s lap on day one. It applies to co-founders just as much as employees, and that’s the part the textbooks miss.
Picture the co-founder who’s all in for three months, then drifts off to something shinier. Without vesting, they keep their full slice of the company for almost no work, and you can’t get it back. With vesting, their shares build up gradually, and a common shape is four years with a one-year cliff: leave inside the first year and you keep nothing. Lawpath’s template works as a claw-back on shares already issued, so the company can reclaim the unvested portion if the milestones aren’t met.
Giving away too much equity to people who don’t stick around is one of the most common early-stage regrets. Vesting is the fix, and it’s far easier to agree before the shares are handed out than after.
What else founders usually need
Beyond these three, a couple of other legal documents tend to come up fast for founders: a company constitution to set your company’s internal rules (rather than relying on the default replaceable rules), and proper employment or contractor agreements once you start bringing people on. If you’re still at the formation stage, sort these while you register your company, so everything’s documented from the very start rather than reconstructed later.
Frequently asked questions
Do I need these documents if it’s just me and one co-founder?
Yes, and arguably more so. A 50/50 split with no agreement is the classic recipe for a deadlock. The moment a second person owns shares or builds something for the business, a shareholders agreement and an IP assignment earn their keep.
Do I really need all three?
Most multi-founder startups do. The shareholders agreement governs the relationship, the IP assignment locks down ownership of what you build, and vesting protects you if someone leaves early. They cover three different risks, so one doesn’t replace another.
Does my company automatically own the IP my founders create?
No. The person who creates IP generally owns it first, and a founder isn’t an employee, so the usual employment rules may not apply. A signed assignment of intellectual property is what actually moves ownership to the company.
Can I use templates, or do I need a lawyer?
Templates are a solid start for aligned founders with a simple setup, and you can create all three on Lawpath. Once you bring in investors, multiple share classes or anything unusual, that’s the point to have a lawyer tailor them.
When should I sort these out?
At the very start, before shares are issued and before anyone builds anything significant. Drafting these once a disagreement has begun is harder and more expensive, because every clause is suddenly read as a tactical move.
You’re not behind for not having these yet. The legal documents that protect founders are something most people only sort once something forces the issue, and the fix is genuinely simple while everyone’s still on the same page. Start with the one that worries you most.
Get the foundations sorted today. Create your shareholders agreement on Lawpath and tick the first one off.
