Understanding Founders' Agreements: A Guide for Florida Startups
- Author: Venus Caruso
- Mar 31
- 4 min read
A founders' agreement is a legally binding contract that establishes the fundamental framework for the relationship between a company's founders and their obligations to their Florida startup. It serves as the foundation of the startup by delineating important terms including equity distribution, voting rights, roles and responsibilities, intellectual property ownership, and decision-making protocols.
Beyond its immediate practical applications, a founders' agreement functions as a risk management tool by preemptively addressing potential areas of conflict, including founder exits, disability, death, or termination scenarios.
7 Key Provisions of Founders' Agreement
Identity of Founders and Their Contributions
Your founders’ agreement should begin clearly identifying all the founders and their initial contributions to your Florida startup. It should also specify what each founder brings to the table, whether it's a cash investment, intellectual property, industry expertise, or sweat equity (e.g., time and effort contributed to the business).
If relevant, it should also address how additional founders might be added in the future, and the process for amending the agreement to reflect such changes.
Equity Distribution
One of the most critical aspects of a founders’ agreement is how ownership of the company is divided. Some startups implement vesting schedules to ensure long-term commitment from founders. A typical vesting schedule might span four years, with a one-year cliff, meaning founders must stay with the company for at least one year before any shares vest (or units in the case of an LLC).
Even though Florida’s business organization laws allow founders considerable flexibility in structuring equity arrangements, clear documentation of ownership rights and vesting conditions (if applicable) is important for preventing future disputes and maintaining proper records.
Roles and Responsibilities
Your founders’ agreement should explicitly delineate each founder's roles, responsibilities, and expected time commitment to protect the company's interests and minimize potential disputes.
Under Florida’s business organization laws, particularly Florida Statutes Chapter 607 for corporations and Chapter 605 for LLCs, founders have significant latitude in structuring their internal arrangements, making clear documentation critical. By specifically outlining each founder's operational duties, decision-making authority, and required time investment, the agreement establishes accountability and sets measurable performance standards.
Moreover, detailed role definitions help prevent the misalignment of expectations that often leads to costly litigation, while also providing a framework for equitable founder compensation and equity distribution based on each founder's agreed-upon contributions.
Decision-Making Process
Your founders’ agreement should establish clear, unambiguous protocols for decision-making to ensure operational efficiency and minimize potential deadlocks. It should outline voting thresholds for different categories of decisions, distinguishing between routine operational matters and major company actions such as capital raises, mergers, or amendments to foundational documents.
Additionally, the agreement should also incorporate specific deadlock-breaking mechanisms such as mediation requirements or buy-sell provisions, as Florida courts generally defer to such contractually agreed-upon resolution procedures before intervening in internal corporate disputes.
Intellectual Property Rights
Your founders’ agreement should adequately address intellectual property rights to protect the company's most valuable assets and prevent costly ownership disputes.
Under both Florida state law and federal intellectual property statutes, clear documentation of IP ownership and transfer is essential for establishing and maintaining the company's rights.
The agreement should explicitly require founders to assign all relevant intellectual property developed during their involvement with the company, including inventions, software, trade secrets, and creative works, through properly executed IP assignment provisions. This becomes particularly crucial in Florida's technology and creative sectors, where intellectual property often constitutes the core of company valuation.
Exit and Termination Provisions
A founders’ agreement should include exit and termination provisions to protect both the company's continuity and the founders' interests during separation events. While Florida's statutory provisions provide basic frameworks for business divorces, a detailed founders' agreement can establish more tailored separation mechanisms. Some typical exit scenarios to consider implementing include voluntary departures, death, and disability, with specific procedures for each circumstance.
Additionally, the agreement should establish specific mechanisms for determining the departing founder's ownership interest value including the timing and terms of payment to help prevent costly valuation disputes.
Furthermore, it should address post-separation obligations, including non-compete and non-solicitation provisions, as well as the continuing confidentiality obligations and intellectual property rights of departing founders.
Restrictive Covenants
In Florida, restrictive covenants are governed by Florida Statutes § 542.335, which provides specific requirements for enforceable non-compete, non-solicitation, and confidentiality agreements. A founders’ agreement should address these key protective measures:
Non-Competition
The agreement should specify whether founders are prohibited from engaging in competing businesses during their involvement and after leaving the company. Under Florida law, non-compete provisions must be reasonable in time, area, and line of business aimed to protect the company's legitimate business interests.
Non-Solicitation
These provisions prevent founders from soliciting the company's employees and customers after departure. Like non-competition provisions, the terms of a non-solicitation provision must be reasonable in time, area (if suitable), and line of business aimed to safeguard the company's legitimate business interests.
Confidentiality
The agreement should outline the founders' obligations to maintain the confidentiality of private, non-public proprietary information including any trade secrets both during their involvement and after departure.
Special Considerations for Florida Startups
State-Specific Compliance
Your founders' agreement should comply with Florida's business organization laws such as the Florida Business Corporation Act (Chapter 607, Florida Statutes) if you're incorporating as a corporation, or the Florida Revised Limited Liability Company Act (Chapter 605, Florida Statutes) if you're forming an LLC.
Industry-Specific Provisions
Florida's diverse economy means startups operate across various sectors, from technology to healthcare. Your founders’ agreement should address any industry-specific concerns and regulatory requirements relevant to the nature of your business.
Closing Remarks
This post provides a general overview of a founders' agreement. It's important to bear in mind that each startup's needs and goals are unique. While Florida law offers significant flexibility in how you structure your founders’ agreement, this flexibility comes with a responsibility to make informed choices. To ensure your founders' agreement aligns with your needs and business objectives, consider working with a Florida business attorney to draft or review your founders' agreement.
This post provides general information only about founders’ agreements in Florida and should not be construed as legal advice or opinion for any individual matter or circumstance. Laws and regulations can change, and specific situations may require different approaches. Always consult with a qualified attorney for advice tailored to your specific circumstances
If you would like to explore how Venus Caruso can assist you, reach out to schedule a complimentary consultation using the contact form or by emailing venus@carusolawoffice.com.
