When you want to add a new co-founder in a private company, you must follow the appropriate process, which is not achievable without it. If you want to understand more about the process of adding a new co-founder to a private firm, read the current blog all the way to the end.Here through this blog we will guide you regarding everything with respect to co-founders in private limited companies.
Co-founders can be added on any stage of the business. It’s not necessary to add co-founders during the time of the registration of the company. They are the people who help the founder of the company in many ways like by providing funding, managing the company, advertisement etc. If you are currently thinking about adding a co-founder in your entity then you must continue reading the present blog till its last paragraph.
Understanding the Private Limited Company
Every now and then a Private Limited Company Registration happens in India. Private limited companies are the corporate bodies which have a number of benefits like separate identity, limited liability, perpetual succession etc. Due to all its benefits and advantages, it offers to the business, people prefer to start their business with such company registration. In order to run a business with such corporate bodies, founders of the business need to take care of every small thing regarding the same, otherwise non compliances can lead to heavy penalties.
At least two directors are necessary in private limited companies. Without a minimum number of directors, this firm cannot be incorporated in India. As a result, while forming a Private Limited Company, make sure you have two directors. People prefer to register this firm because of the numerous advantages it provides, such as dependability, reputation, consumer trust, and so on.
Who are the Co-founders?
Co-founders are the one who invests their money, time and efforts equally as the founder after collaborating in the business idea of the founders. Co-founders can be added in the business at any stage of the business. In the vacancy of the position of the co-founder, there can be various reasons due to which a business entity can add a new co-founder in a private company. Some of the key reasons include funds, expertise, resources, and growth of the business. Developments of the business etc.
Who are the Founders?
When somebody has a plan and decides to put forth it and give it life through establishing a business in the marketplace, the individual who developed the original concept and commenced the business is considered to be the founder of the same business. There might be more than one founder in a single company. Founders of the company invest their time, money and efforts to make the small idea into a big venture.
Bringing in, a New Co-Founder
During the time of the vacancy of the co-founder’s position in a company, an entity can add a new co-founder in a private company. The most important aspect of adding a cofounder in a team is because of the skills and professional knowledge of the person. These individuals contribute to the advancement of the organization by their skills, possibly because they are co-founders. It is not easy to become a business co-founder. This designation comes up with various responsibilities as well as liabilities, hence one must become the so-founder of an entity very carefully.
Understanding of Co-Founders Agreement
In order to add a new co-founder in a private company, companies and the person who is going to join you as co-founder needs to sign a co-founder agreement. Without doing the same no one can add a new co-founder in a private company. It is an agreement between the two parties which indicates all the terms and conditions on which a person is going to be added as a new co-founder in a company. It’s important to sign this agreement so that there will be no further disputes regarding the same in future.
Important Clause of the Co-Founders Agreement
Some of the important clauses of the Co-founders Agreement, which is necessary to sign in order to add a new co-founder in a private company are:
- Equity Distribution which talks about how the company and co-founder will share the equity
- Dis-ownership and Departure related terms as well as conditions has been given under this clause of the agreement
- Profit Distribution must be clearly mention in the agreement between the company and the co-founder
- Roles and Responsibilities of the co-founder will be mentioned here in this clause
- Termination and Firing related details has been given under this clause of the agreement
- Decision Making clause like how can a co-founder takes part during the time of the decision making related to the particular matters in a company
Signing in the Company Through the Co-Founder Agreement
A co-founder always needs to sign a co-founder agreement before becoming the co-founder of any entity. Some of the key elements related to co-founder Agreement (necessary to sign in order to add a new co-founder in a private company) with the perspective of the company as well as co-founders are discussed below in the same blog.
Review AOA and MOA of the Company
It is very important for you, if you are thinking about joining a company as their co-founder, to read the company’s MOA as well as AOA in detail, in order to know the company and its functioning better. Without reading or understanding these two crucial documents of the company you should not become the co-founder of such an entity. If you are doing so, you are risking yourself.
Read the Co-Founders Agreement of the Company
As any new co-founder will be added to the company through the co-founders agreement, you must first understand the entire agreement carefully before signing the same. If you are not able to understand the legal language of the same, take help of the legal professional who can help you out to understand this agreement carefully. Singing it randomly can prove fatal, hence you must be conscious about signing any such agreement.
Pre Decided Procedures and Policies
Always ask for the company’s policies as well as procedures to add a new co-founder in a private company. They have both the policies as well as procedures in order to add a new co-founder in a private company. It’s important to review them before becoming the co-founder of a company or an organization. Don’t make yourself a fool by trusting everything which company is going to tell you. Always go through the documents carefully before signing them.
Conclusion
Adding a new co-founder is a massive task that must be approached with caution. If you are considering to add a new co-founder in a private company or vice versa, you can contact us for assistance; we are only a click away. Our team of professionals who are having expertise in the same field will contact you and assist you with the same. There are various reasons due to which a company decides to add a co-founder in a company. One of the most common is adding the expertise of the person to the company. When a co-founder is added but due to some reasons if he or she left then in such a scenario an entity can add a new co-founder in a private company.
