A CEO partnership agreement should make four things unambiguous: who owns what, who may decide what, how equity is earned and retained, and what happens when a founder or the company changes. In practice, it is a founders or cofounders agreement coordinated with the company’s charter, bylaws or operating agreement, board consents, employment agreements, equity instruments and intellectual-property assignments. It does not replace those documents.
Use the checklist below to cover the business relationship before signing. Entity type, governing law, securities rules, fiduciary duties, employment law, tax treatment and non-compete rules vary by jurisdiction, so local counsel should convert these business decisions into enforceable documents.
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1. Identify the parties, company and purpose
Start with the legal basics so there is no doubt about who is bound and what venture the agreement covers.
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- Parties: list every founder’s legal name, address and notice details. If a founder will hold equity through a company or trust, identify that vehicle and its obligations.
- Entity: name the existing corporation, limited-liability company or partnership, its jurisdiction and principal address. If formation is pending, state the proposed entity and the deadline for forming it.
- Business purpose: describe the products, services, territories and activities covered. A defined purpose helps determine whether a later opportunity is a company opportunity or a founder’s personal project.
- Term: state the start date and whether the arrangement continues indefinitely, ends on a milestone or applies only to a particular project.
- Schedules: attach contribution, equity, intellectual-property and compensation schedules rather than relying on informal spreadsheets or email promises.
Partnership-law drafting guidance commonly calls for the partners’ identities, contributions, management, admission and retirement rules, dispute settlement, dissolution and breach liability to be stated clearly. Even if your venture is a corporation or LLC, those subjects are a useful completeness test.
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2. Define the CEO’s role and operating authority
The title “CEO” alone does not tell a founder, board or investor what the person may do. Describe the role in operational terms and connect it to the entity’s formal appointment and employment documents.
Put each founder’s job in writing
- Title, functional area and expected decision ownership (for example, product, engineering, sales or finance).
- Expected time commitment, work location, travel and availability during an emergency.
- Reporting lines, performance objectives and the cadence for reviews.
- Authority to hire, supervise and terminate employees and contractors within an approved plan.
- Access to financial, customer, product and legal information, including regular reporting to the board or partners.
- Salary, guaranteed payment, benefits, expense policy and approval required for unusual expenses.
Separate ordinary authority from reserved matters
Give the CEO authority to run day-to-day operations inside a written budget and business plan. Then list decisions that require partner, board or investor approval. A practical schedule can look like this:
| Decision | Suggested approval rule | Drafting detail to settle |
|---|---|---|
| Routine operating spend | CEO within approved budget | Set a single-transaction and annual limit; define emergency exceptions. |
| Hiring or removing senior executives | Board or specified supermajority | Name the roles covered and whether the CEO may make an interim appointment. |
| Issuing shares, options or other equity | Board and any required investor or member approval | State the valuation, pool and notice process. |
| Borrowing, guarantees or liens | Partner or board approval above a threshold | Use a currency amount and say whether related debt is aggregated. |
| Sale, merger or substantially all assets | Supermajority or unanimous approval | Coordinate with drag-along, appraisal and statutory voting rules. |
| Changing business scope or entering a new regulated market | Reserved approval | Define what counts as a material change. |
| Related-party transaction | Disinterested approval after disclosure | Require recusal, written terms and conflict minutes. |
State whether the CEO has a casting vote. If so, limit it to ordinary matters and explain what happens when the CEO is conflicted or the issue is reserved.
3. Record ownership, contributions and economics
Do not reduce the deal to “we are 50/50” without documenting what each founder contributes and how the percentages were reached. Ownership may reflect cash, property, pre-existing intellectual property, industry relationships, technical know-how, experience and future services.
Use a contribution schedule
- Cash: amount, payment date, currency and whether it is capital or a loan.
- Property and equipment: description, condition, title and agreed value.
- Pre-existing IP: itemized code, designs, patents, trademarks, content, domains, data and documentation, with ownership and license terms.
- Services: role, expected hours, milestones and the consequence of missed commitments.
- Third-party rights: open-source, employer-owned or licensed material that cannot be assigned outright.
State each founder’s percentage ownership, voting power, capital account treatment, profit and loss allocation, salary or guaranteed payment, expense reimbursement and tax-distribution policy. For an LLC or partnership, explain how allocations and distributions interact with capital accounts and tax obligations; for a corporation, align the cap table, share class rights and board approvals with the charter.
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Deal with future capital calls
Specify when additional funding may be requested, who approves it, each founder’s pro-rata obligation, the response deadline and what happens if someone does not contribute. Options include treating the shortfall as a founder loan, issuing additional equity under a defined formula or allowing the company to proceed without the non-contributing founder. Avoid an automatic forfeiture that conflicts with securities or corporate law.
4. Set vesting, cliffs and dilution rules
Vesting prevents a founder who leaves early from keeping the entire future stake. The agreement should state the vesting start date, service or milestone conditions, cliff, acceleration, repurchase of unvested equity and treatment in a financing or sale.
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A common drafting example
The University of Pennsylvania Entrepreneurial Legal Clinic model uses four-year vesting with one forty-eighth of the grant accruing each month and a one-year cliff. A founder who leaves before the cliff receives no vested portion under that example; after the cliff, the accrued amount vests monthly. Unvested equity returns to the company when the founder departs. This is a drafting model, not a universal market rule.
| Event | Questions the agreement must answer |
|---|---|
| Resignation or termination without cause | What portion is vested on the last service day? At what price and by when may the company repurchase the remainder? |
| Termination for cause | Does “cause” have a precise definition, and are vested shares treated differently from unvested shares? |
| Sale of the company | Is there single-trigger acceleration, double-trigger acceleration after a job loss, or no acceleration? |
| Financing | How are new shares issued, and which approvals and pre-emption or participation rights apply? |
| Milestone failure | Are milestones objective, measurable and subject to a cure period or independent review? |
Include the expected employee option pool, how dilution is shared, and whether founders receive participation rights in later rounds. Every percentage should identify the denominator (for example, issued shares or fully diluted shares) and the capitalization date.
5. Assign intellectual property and protect confidential information
IP ownership is one of the most consequential provisions in a founder agreement. List what each person brings in, assign company work product, and obtain the signatures needed to perfect those rights.
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Pre-formation and post-formation work
For pre-formation material, attach an exclusion schedule for anything a founder keeps. Everything else that is relevant to the venture should be assigned or licensed to the company on clearly stated terms. For post-formation work, require assignment of inventions, source code, designs, documentation, content, trademarks, domain names, databases and other work product created within the business or using its resources.
A University of Pennsylvania model assigns each founder’s rights in the business concept and related work product to the company upon formation and includes confidentiality and non-infringement representations. Adapt that concept to local law and to any employer, university, contractor or open-source obligations.
Make the assignment workable
- Identify excluded personal IP and grant the company a license if it is necessary to operate.
- Disclose third-party and open-source licenses, attribution duties and copyleft conditions.
- Require further-assurance signatures for registrations, patent filings and enforcement.
- Define confidential information, permitted use, security practices, return or deletion at departure and legally required disclosures.
- State that confidentiality, IP assignment and assistance obligations survive termination.
6. Handle conflicts, side projects and corporate opportunities
Founders often have consulting work, investments or personal projects. Define what is allowed instead of relying on assumptions.
- Require prompt disclosure of related-party transactions and approval by disinterested decision-makers.
- Describe outside employment, advisory roles, investments and personal projects that are permitted.
- Set rules for use of company equipment, accounts, data, personnel and paid time.
- Define how a founder must present a business opportunity that overlaps with the company’s purpose.
- Specify competing activity restrictions only to the extent local law permits. Non-competes may be unenforceable or restricted; counsel should tailor any confidentiality, non-solicitation or garden-leave language.
7. Build decision rules and a real deadlock process
State quorum, notice, meeting, voting and written-consent procedures. Distinguish ordinary majority decisions from supermajority or unanimous reserved matters, and identify which body—the board, members, partners or shareholders—has legal authority.
An even split needs a deadlock mechanism. The University of Pennsylvania clinic warns that without one, a company can grind to a halt when founders disagree. A usable sequence is:
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- Require the disputing founders to exchange written positions and meet within a defined period.
- Escalate to an independent adviser or industry expert who provides a nonbinding recommendation.
- Use confidential mediation with a specified mediator-selection method and deadline.
- If mediation fails, apply a buy-sell, rotating-chair, sealed-bid or dissolution mechanism that complies with local law.
Do not copy a template that omits this section. Define what happens to payroll, customer commitments and emergency spending while a deadlock is unresolved.
8. Plan departure, removal, incapacity and death
Address the difficult cases while relationships are still good. Cover resignation, removal for cause, sustained under-performance, disability, death, extended leave and a change from full-time to part-time service.
Define leaver categories and economics
Set objective good-leaver and bad-leaver definitions, the vesting date, any acceleration, repurchase price, payment schedule and security for deferred payments. A company may need time to fund a buyout, so state whether installments bear interest and what happens if the company cannot legally repurchase equity.
Transfer operational control
- Identify who becomes interim CEO and who may access systems, bank accounts and records.
- Require delivery of passwords, source code, customer contacts, contracts and company property.
- Set a transition period and limits on contacting customers, employees and suppliers.
- Address insurance proceeds, estate rights and valuation after death or incapacity.
QLegal’s founder guidance specifically highlights illness, under-performance, a founder who wants to leave and an under-performing business as scenarios to address in advance.
9. Regulate transfers, financing and a sale
Include transfer restrictions so a founder cannot unexpectedly sell to a competitor or unsuitable buyer. Cover permitted transfers to a trust or wholly owned vehicle, rights of first refusal, notice contents, valuation and closing mechanics.
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Align founder transfer terms with financing and exit provisions:
- Information rights: specify financial statements, budgets, inspection rights and response times.
- New investors: state required approvals, disclosure obligations and whether existing holders have participation or pre-emption rights.
- Dilution: explain how the employee pool and new securities affect each founder.
- Tag-along rights: allow minority holders to join a qualifying sale on the same terms when appropriate.
- Drag-along rights: require minority holders to cooperate with an approved sale, with protections against unequal consideration or excessive warranties.
- Sale cooperation: require signatures, disclosures and transition assistance, while limiting personal liability to agreed caps.
Never promise a transfer, veto or liquidity right that the charter, bylaws, operating agreement or investor documents do not grant.
10. Choose dispute resolution and complete the boilerplate
Decide whether disputes proceed through negotiation, mediation, conciliation, arbitration or court litigation. Specify governing law, venue, court or arbitral institution, confidentiality, emergency relief and attorneys’ fees. Cross-border founders should address service of process and enforcement of judgments or awards.
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11. State termination and dissolution mechanics
Explain when the agreement ends: a sale, dissolution, replacement by an approved agreement, or another defined event. List surviving obligations, including IP, confidentiality, indemnities, payment duties and dispute clauses.
For a wind-down, identify dissolution triggers, who controls liquidation, how creditors and taxes are paid, how remaining assets and liabilities are allocated, and how records and customer data are retained or destroyed. The process must match the entity statute and the company’s constitutional documents.
12. Execution checklist before signing
- Reconcile the cap table, vesting schedule and option pool with the charter or operating agreement.
- Attach signed contribution, excluded-IP and third-party-license schedules.
- Obtain board, member or partner consents required for appointments, equity and assignments.
- Sign employment, invention-assignment, confidentiality and equity instruments at the same time.
- Test the deadlock, departure, repurchase and sale examples with actual numbers and dates.
- Confirm tax, securities, employment, privacy and non-compete consequences with local advisers.
- Store executed copies, amendments and approval minutes in the company’s official records.
A strong CEO partnership agreement is specific enough to run the company on an ordinary Tuesday and resilient enough to govern a founder departure, financing, deadlock or sale. The final document should read consistently with every formal company record and signed founder instrument.
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