Legal Liability and Corporations Essay

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Entrepreneurship

What is a founders' agreement? Describe the purpose of a buyback clause and why it's important.

A founder's agreement is the 'founding' agreement of a corporation and defines the "the roles and responsibilities of the founding team, equity ownership and vesting and IP ownership" (Yaghmaie 2015). Defining what the founders' roles are is critical given that roles may vary over the course of a company's lifespan and can become a subject of dispute. "You'll need to allocate the ownership of your new enterprise amongst the founding team. While this is a subjective matter and can sometimes be very delicate, it is imperative that you nail down how you will split up the equity between the founding team upfront to make sure there are no misunderstandings or hurt feelings once things get off the ground" (Yaghmaie 2015). A buyback clause specifies that a founder that wishes to leave the firm must sell his or her shares to the remaining founders. The purpose of this agreement is to ensure that ownership remains within the control of those who began the original firm (Baron & Shane 240).

Part B: List and explain four (4) steps entrepreneurs can take to avoid legal disputes.

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First and foremost, getting everything in writing is essential. Vague and ambiguous terms almost inevitably lead to discord and disputes. The terms of firm ownership can be clearly stated in the founders' agreement; any contractual arrangement entered into by the company should be legal and in writing, whether the contract is with another firm or an employee.

There should be specific guidelines and policies for appropriate conduct, and also specific channels through which employees can deal with personal disputes, including those related to harassment. So should any privacy policies, such as when and if employees can expect to have emails monitored.

Finally, having clear ethical guidelines is also important. Not only should illegal conduct be avoided; the appearance of illegality should also be shunned.

IP (intellectual property) and the expectations surrounding IP (such as what the employee owns or does not own when he/she generates new ideas or products) should also be specified. "Getting IP assigned into the entity is simple and there are many forms available online that get this basic assignment accomplished. Do it on day one and don't wait too long" (Yaghmaie 2015). Issues pertaining to disclosure of company information should also be specified in.....

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