How do I terminate my co-founder? Are the following two steps correct: 1. Repurchase unvested shares, 2. Vote to remove him from the Board of Directors? My co-founder has decided to take up a job while I continue working on the startup.

Situations in which a co-founder is terminated unilaterally from a startup are commonplace, however despite the fact that business relationships between founders are common should not be an occasion to discount the legal risk and by association financial risk these situations can present. As such, it is important to understand terminating a co-founder should be carried out with the following considerations in mind:

  • Never unilaterally terminate a co-founder without legal counsel. Counsel can review any agreements which outline termination procedures and other ancillary rights and obligations that might in play when a co-founder is terminated.
  • Always follow the terms of any agreement in place which outlines the rights of a co-founder on termination and the grounds under which they can be terminated. Gaming the situation to your advantage more often than not ends badly for the party issuing the termination.
  • If an agreement is not in place, always try to negotiate an exit through legal counsel since this will reduce the risk of legal claims being raised in the future based on wrongfully terminating a co-founder.
  • Understand that termination carries with it collateral damage in that you do not want the reputation of being difficult to do business with or worse being unfair.

If you’re caught up in a mess with your co-founder, feel free to seek legal counsel. LawTrades offers a variety of business law attorneys that can be with you every step of the way. Getting sound advice before trying to terminate your co-founder could end up saving you a bunch in litigation costs. Visit us to avoid the hassle! Good luck.