Read Part One here.

computer-1185637_1280-1.jpgHave founder’s agreements in place

So you followed all the advice in the last section and did your homework on your co-founders before starting your venture, and things still didn’t work out.  One or more of your partners has decided to leave, and besides the emotional toll that can take on a business, there can also be legal or financial consequences as well if you haven’t planned properly. When starting out, you should have all co-founders sign a co-founders agreement to avoid any complications around issues of ownership, equity, or voting rights that could arise. This is another area where we all like to think that we know the people we’ve worked with enough to think that they would act honorably, but it isn’t enough to hope for the best.  Preparing for the possibility that one of you co-founders will leave, or, less pleasantly, you will have to force them to leave, will keep your company from being thrown into further turmoil.

Assign intellectual property to the company.

It would be natural to think that the work that is created by your employees or contractors would belong to your company and would stay with you should they decide to leave the company. After all, you’re paying their salary or wages in exchange for the work, so it should follow that you own what they created for you. But the law surrounding that can be complicated, which is why your company should be prepared. As part of the hiring process, new employees or contractors should sign agreements that state that any work created belongs to the company.

Ownership issues are another area of concern when it comes to co-founder departures. If you’ve filed for patent, trademark, or copyright protection on works created by your company, but the filing is in the name of an individual co-founder, then the rights to those creations could come into contention post-split. When filing for protection on your intellectual property, assign it to the business entity rather than a person to ensure a clean break should they leave the company.     

Handle problems now, not later

Perhaps the biggest mistake that startups can make is to believe that all of the above issues and more are things that can be dealt with at a later time. Usually, by the time these small problems rise to the level of big problems, it’s too late for your company to try and deal with it in a way that isn’t painful to you and the business. No one has the foresight to know when disaster is about to strike.  And while it would be remarkable to be able to avoid it altogether, responsible entrepreneurs take the steps necessary to prepare for the worst-case scenarios that may befall their business. It may seem like a hassle or an unnecessary drain on your limited resources to address areas that you may not think you’ll ever need to worry about, but it costs considerably less to get things right the first time.

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