Free Co-Founder Vesting & Equity Split Agreement Template

Two friends start a company, split the equity 50/50 over a beer, and start building. Eight months later one of them stops showing up: new job, lost interest, life happened. The problem is that the no-show still owns half the company, half of every future funding round, acquisition, and vote, while the founder who stayed does all the work. This is the most common way early startups die, and one document prevents it: a co-founder vesting and equity split agreement. This guide gives you the copy-paste agreement, the market-standard vesting terms, the clauses investors check for, and the one tax filing, the 83(b) election, that has a 30-day deadline with no extensions and no second chances.

What Is a Co-Founder Vesting Agreement?

A co-founder vesting agreement is a contract that says founders earn their shares over time by staying and building, instead of owning everything outright on day one. Leave early, and the company can buy back or reclaim the unearned portion. The equity split side of the document records who gets what percentage, what each founder contributed (cash, code, customers, intellectual property), and the rules for issuing, transferring, and repurchasing shares.

Think of vesting as a retention mechanism with teeth. Without it, equity is a gift; with it, equity is compensation that has to be earned. Investors expect founder vesting to exist before they wire a dollar, which is why nearly every venture-backed company has it, and why putting it in place early, before there is anything to fight over, is far easier than retrofitting it during a funding round.

Why Every Startup Needs One (Even a Two-Person Team)

“We trust each other” is exactly why founders skip this document, and exactly how they get burned. Trust is not a legal structure. Here is what happens without vesting when a co-founder walks after six months:

• Dead equity. The departed founder keeps the full stake. It sits on your cap table doing nothing, diluting everyone still building.
• Fundraising stalls. Investors see a large chunk held by a non-contributor and walk; it signals an unstable team and a broken cap table.
• No equity to hire the replacement. The shares you would use to attract the person who fills the gap are locked up with the person who left.
• Deadlock. A 50/50 split with no vesting and no tie-breaker lets a departed or hostile co-founder freeze major decisions.

Vesting converts all four from company-killers into routine cleanup. If the leaver earned 12.5% (six months into a four-year schedule, before the cliff, often 0%), the company recovers the rest and redeploys it.

How Vesting Works: The 4-Year Schedule and 1-Year Cliff

The market standard for founder vesting in 2026 remains a four-year schedule with a one-year cliff:

• Four-year schedule: equity vests in equal monthly increments over 48 months, roughly 2.08% of the grant per month.
• One-year cliff: nothing vests for the first 12 months. Reach the anniversary and 25% vests at once; leave at month 11 and you keep zero. The cliff filters out founders who bail in the fragile first year.
• Monthly thereafter: the remaining 75% vests month by month until you are fully vested at month 48.

Teams sometimes credit a founder with a few months of vesting on day one to recognize real pre-incorporation work, such as months spent building the prototype. That is reasonable; keep it modest and put it in writing. A founder claiming two years of “sweat equity” credit for a weekend of work is a signal worth heeding before you sign anything.

Reverse Vesting: Why Founder Shares Work Backwards

One term of art worth decoding: founder vesting is usually reverse vesting. Employees with stock options earn the right to buy shares as they vest. Founders receive all their shares up front on day one, which matters for taxes and voting, but the company holds a repurchase right over the unvested portion that lapses on the same 4-year/1-year schedule. Same economics, opposite mechanics: you own the shares, and the company’s right to take back the unearned ones melts away month by month. This is why the tax question in the 83(b) section below exists at all, and why the agreement below is written as a repurchase right rather than a share grant schedule.

How to Split Founder Equity Fairly

Vesting decides when you earn shares; the split decides how many. The instinct is 50/50 to avoid an awkward conversation, but an even split chosen to dodge a hard talk breeds more resentment than an honest, slightly unequal one. Work through four factors:

• Idea and IP. The idea alone is worth less than founders think; execution is everything. But a founder bringing a working prototype, a patent, or a proprietary dataset has contributed real capital, and the IP assignment clause below is how the company actually captures it.
• Time commitment and risk. Full-time from day one is a different bet than nights-and-weekends “until we raise.” Equity should reflect risk taken, not hours promised.
• Role and replaceability. The people the company cannot survive without, typically whoever builds the product and whoever sells it, justify larger shares.
• Cash invested. A founder writing a real check is buying equity with money, not sweat. Recognize it separately, often as a priced share purchase or a convertible note, rather than silently inflating their founder percentage.

Then write the reasoning down, not only the numbers. When someone questions the math in year two, and someone will, a one-paragraph rationale inside the signed agreement ends the argument before it starts.

Copy-Paste Template: Co-Founder Vesting & Equity Split Agreement

Replace the bracketed items, delete what does not apply, and read the note at the end about entity type. The downloadable versions above mirror this text.

Entity-type note, read before using: this template assumes a corporation issuing restricted stock, the structure investors expect and the one the 83(b) election is built for. In practice the mechanics live across a small document set: this agreement, per-founder restricted stock purchase agreements, and the company’s bylaws. If you are an LLC, ownership is in units governed by your operating agreement, vesting is drafted as unit-based provisions there, and the tax treatment differs; have an attorney adapt it rather than swapping the word “shares” for “units.”

Clauses Investors Will Check For

• Share counts and percentages, both. Percentages drift as you issue new shares; the share count is the anchor.
• The repurchase right and its price. Unvested shares go back at the lower of cost or fair market value; that “lower of” is what keeps a departing founder from profiting on unearned equity.
• IP assignment with “hereby assigns.” Present-tense assignment language transfers ownership now; “agrees to assign” is a promise that requires a second document later. Diligence teams read for this distinction, and it is the same rule that governs any IP assignment: no signed writing, no transfer.
• Right of first refusal. Keeps founder shares from wandering to outsiders without the company and co-founders getting first shot.
• Good-leaver/bad-leaver terms. Different outcomes for a founder who departs cleanly versus one terminated for cause.
• Confidentiality. Usually handled in a separate NDA or confidentiality agreement signed alongside this one.
• A deadlock-breaker for 50/50 teams. A casting vote, an independent director, or a buyout mechanism; without one, an even split can freeze the company. (For established companies, the buyout mechanics live in a buy-sell agreement; this clause is the startup-stage version.)

Acceleration: Single Trigger vs Double Trigger

Acceleration clauses speed up vesting when something big happens, usually an acquisition. The two flavors behave very differently:

• Single trigger: vesting accelerates the moment the company is acquired. Founders like it; acquirers dislike it, because the people they are buying can cash out and leave the day the deal closes.
• Double trigger: vesting accelerates only if two things happen: the company is acquired and the founder is terminated without cause (or resigns for good reason) within a set window, often 12 months. This is the investor-friendly market standard because it protects founders from being fired post-close without letting them walk on day one.

For most early-stage teams, double-trigger on 100% of unvested shares is the sensible default, and it is what the template above uses. Single-trigger is rarely worth the fight it invites in diligence.

The 83(b) Election: 30 Days, No Extensions

Here is the deadline that matters more than anything else on this page. When you receive stock subject to vesting, the default tax rule taxes you as the shares vest: each vesting month, the spread between what you paid and what the stock is then worth is ordinary income, on shares you cannot sell. If the company grows, that is a recurring tax bill that compounds for four years.

An 83(b) election flips the default. You elect to be taxed once, now, on the value of all the shares at grant, when a founder’s stock is typically worth a fraction of a cent per share, so the tax today is at or near zero, and all later growth waits for sale, generally as capital gain. The statute is blunt about the window: the election “shall be made not later than 30 days after the date of such transfer” (26 U.S.C. §83(b)(2)). Thirty calendar days from the share purchase, not from when you remember. There is no extension and no late-filing relief.

The mechanics got easier recently, which most older guides miss. The IRS released Form 15620, a standardized 83(b) election form, in late 2024, and since mid-2025 it can be filed online through the IRS’s forms portal with an ID.me login; paper filing by mail still works too. Whichever route you use: file within the 30 days, keep the confirmation (or send paper by certified mail and keep the receipt), and give a copy to the company, which the template’s Section 10 requires. Calendar it the day you sign the stock purchase, and treat the calendar entry like a court date.

How to Fill Out the Template

1. Company and founder details. Legal entity name, state, each founder’s full legal name.
2. The split, with reasons. Share counts, percentages, and a one-line basis for each founder in Section 1; that rationale is the argument-ender.
3. Vesting dates. Commencement date (incorporation or each founder’s start), 48-month period, 12-month cliff, any documented pre-incorporation credit.
4. Repurchase and leaver terms. Confirm the “lower of cost or FMV” price for unvested shares and the [90]-day exercise window.
5. Acceleration. Double trigger, percentage, and the post-closing window.
6. Roles and deadlock. Fill Exhibit B’s reserved matters and pick a deadlock-breaker you would actually accept.
7. Sign, issue, then file. Everyone signs (electronic signatures are fine, and legally valid), the company issues the shares, and every founder files their 83(b) within 30 days.

Many founders complete the template to organize the decisions, then pay for an hour of startup-attorney review before signing. That sequencing keeps legal spend low while putting professional eyes on the sections a lead investor will scrutinize.

Common Mistakes to Avoid

• No vesting at all. The cardinal sin; fix it before you raise or hire.
• Missing the 83(b) window. Thirty days, statutory, unforgiving. File it the same week you sign.
• Vague IP assignment. Without “hereby assigns” language covering pre-incorporation work, the company may not own its own product.
• 50/50 with no tie-breaker. Even splits need a deadlock mechanism, or the first serious disagreement becomes structural.
• Verbal promises. “We’ll figure out equity later” is how co-founder relationships end up in litigation. Paper it while everyone still likes each other.
• Signing a template nobody read. This document governs who owns the company; understand every bracket you fill.

When to Bring in a Lawyer

A solid template handles the standard case: two to four founders, a clean cap table, conventional 4-year/1-year vesting. Bring in a startup attorney when the facts get heavier: a founder investing meaningful cash, pre-existing IP with unclear ownership, international founders, a founder still employed elsewhere (their employer may have claims on their work), or a priced round on the horizon. An hour of review is cheap against an equity dispute, and cheaper still against re-papering a broken cap table in diligence. Use the template to do the thinking; spend the legal budget on review, not on reinventing standard clauses.

Frequently Asked Questions

What is the standard founder vesting schedule?

Four years with a one-year cliff: nothing vests for 12 months, 25% vests at the anniversary, and the remaining 75% vests monthly until month 48. It is the structure investors expect to see on a founder cap table.

Should co-founders always split equity 50/50?

Not automatically. An even split is right when contributions, risk, and roles genuinely match, but choosing it to avoid a hard conversation usually backfires. Base the split on IP, time commitment, role, and cash, and write the reasoning into the agreement.

What happens to a co-founder’s shares if they leave early?

The company repurchases or reclaims the unvested portion under the repurchase right. A founder leaving at 18 months on a standard schedule keeps roughly 37.5% of the grant; the rest returns to the company for investors and new hires.

What is reverse vesting?

The founder version of vesting: you receive all shares up front, and the company holds a repurchase right over the unvested portion that lapses monthly on the vesting schedule. Employees’ options vest forward; founders’ shares un-restrict backward. The economics match, but the day-one ownership is why the 83(b) deadline exists.

What is an 83(b) election and why does it matter?

A one-page IRS election to be taxed on restricted stock at grant, when founder shares are worth nearly nothing, instead of at each vesting date as the value grows. It converts future appreciation into capital gain and avoids annual phantom income, but only if filed within 30 days of the share transfer.

Can I file the 83(b) election online?

Yes. The IRS standardized the election as Form 15620 in late 2024 and opened online filing in mid-2025 through its forms portal with an ID.me login. Paper filing by mail still works. Either way the 30-day deadline is unchanged, and you should keep the confirmation and give a copy to the company.

Do I need a lawyer to use a co-founder agreement template?

For a standard two-to-four-founder startup, the template plus a short attorney review is the cost-effective path. Go straight to counsel when there is significant cash investment, pre-existing or employer-entangled IP, international founders, or an imminent priced round.

The Bottom Line

Founder equity has two failure modes: the co-founder who leaves with half the company, and the tax bill that compounds because nobody filed a one-page election. Both are solved in a week. Agree on a split you can defend out loud, put every founder on 4-year/1-year reverse vesting with a repurchase right, double-trigger acceleration, hereby-assigns IP language, and a deadlock-breaker, then file each 83(b) within 30 days, online via Form 15620 or by certified mail. Sign it while everyone is still friends. That is the entire trick: the document only works if it exists before you need it.

David Miller

David Miller writes about small business and LLC formation for ClearLegalTips. He focuses on making business registration, S-corp elections, and seller’s permits understandable for new founders handling them without a lawyer.