Founder employment agreements

Founders of technology-based and life sciences do not generally enter into “employment agreements” with their companies. Employment agreements typically provide the employee with rights to severance and other employment-related protections. Because of the large equity stake the founders have in the company and the importance of cash to a startup, investors will generally not agree to provide contractual severance rights to founders.

That said, founders should sign an employment letter with the company that sets forth the general terms and conditions of their employment and states that they are “at-will” employees. This means that they can leave the company at any time (although their rights to retain their shares or exercise their will depend on the vesting terms), and also that the company can terminate their employment at any time—with or without cause. They should also sign an agreement with the company where they agree to keep the company’s information confidential, assign their rights to any developed intellectual property to the company and, in most states, agree not to compete with the company for a period of time following their employment. Take a look at our Document Generator for some of these forms.

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