12 Types of Startup Contracts Every Founder Should Know

Building a startup means building relationships — with co-founders, employees, investors, advisors, vendors, and customers. Every one of those relationships should be governed by a contract. Not because you expect things to go wrong, but because clear agreements prevent misunderstandings, protect your equity, and make your company investable. Yet many first-time founders delay or skip contracts until a dispute forces the issue. This guide covers the 12 contracts every startup founder should know, when you need them, and what to include.

1. Co-Founder Agreement

The co-founder agreement is arguably the most important contract a startup will ever sign — and the one most often skipped. It defines the relationship between founders before money, employees, or investors enter the picture. Key provisions include equity split (who owns what percentage), vesting schedules (typically four years with a one-year cliff), roles and responsibilities (who handles product, sales, operations), decision-making authority (voting rights, deadlock-resolution mechanisms), IP assignment (all work product belongs to the company, not to individual founders), departure terms (what happens if a founder leaves — good leaver vs. bad leaver provisions), and non-compete and non-solicitation clauses. Without a co-founder agreement, you are relying on default corporate law, which may not reflect the deal you actually made. A 50/50 equity split with no vesting means a co-founder who leaves after three months walks away with half the company.

2. Non-Disclosure Agreement (NDA)

NDAs protect confidential information shared during business discussions — with potential investors, partners, employees, or vendors. A standard NDA defines what constitutes confidential information (as broadly as reasonably possible), the obligations of the receiving party (not to disclose, not to use for purposes other than the stated purpose), the duration of the obligation (typically 2–5 years), exclusions (information already public, independently developed, or legally required to be disclosed), and remedies for breach (injunctive relief plus damages). Startups often need both one-way NDAs (where you are disclosing information to the other party) and mutual NDAs (where both parties share confidential information). Using a standardised NDA template saves time and ensures consistency.

3. SAFE (Simple Agreement for Future Equity)

The SAFE, created by Y Combinator, is the most common instrument for early-stage fundraising. It is not a loan and not equity — it is a contract that gives the investor the right to receive equity in a future priced round. Key terms include the valuation cap (the maximum valuation at which the SAFE converts), the discount rate (typically 10–20% below the price paid by new investors), the triggering event (usually a priced equity round), and pro-rata rights (whether the investor can maintain their percentage in future rounds). SAFEs are simpler and faster than convertible notes (no interest rate, no maturity date), which is why they dominate seed-stage fundraising. However, founders should understand the dilutive impact of multiple SAFEs — especially post-money SAFEs, where the cap includes the SAFE itself in the ownership calculation.

4. Convertible Note

A convertible note is a short-term debt instrument that converts into equity at a future financing round. Unlike a SAFE, it accrues interest and has a maturity date. Key terms include the principal amount (the investment), the interest rate (typically 2–8% per annum), the maturity date (usually 12–24 months), the valuation cap and/or discount rate (similar to a SAFE), and conversion mechanics (automatic upon a qualifying financing round, optional upon maturity). Convertible notes are more common in markets outside the US (particularly the UK and Europe) and in situations where the investor wants debt-like protections. Founders should be aware that if the note matures without a qualifying round, the investor may have the right to demand repayment — which can be existential for an early-stage company.

5. Employment Agreement

Every employee should have a written employment agreement. At a minimum, it should cover job title and responsibilities, compensation (salary, bonuses, equity grants), benefits and leave entitlements, working hours and location (especially important for remote/hybrid teams), probation period and notice requirements, confidentiality obligations, IP assignment clause (work created during employment belongs to the company), non-compete and non-solicitation clauses (where enforceable), and termination provisions (cause, convenience, redundancy). In many jurisdictions (UK, EU, Australia), written employment contracts are a legal requirement. Even in at-will employment states (most US states), a written agreement protects both parties and ensures clarity about equity grants and IP ownership.

6. Consulting / Contractor Agreement

Startups rely heavily on contractors and consultants, especially in early stages. A consulting agreement should define the scope of work (deliverables, timelines, milestones), compensation (fixed fee, hourly rate, or milestone-based), IP ownership (critical — ensure all work product is assigned to the company, not licensed), confidentiality obligations, termination provisions (notice period, payment for work completed), and independent-contractor status (to avoid misclassification as an employee, which carries legal and tax risks). The IP assignment clause is particularly important. Without it, the contractor may retain ownership of code, designs, or other work product they create — even if you paid for it.

7. Advisor Agreement

Advisors provide strategic guidance, introductions, and credibility. An advisor agreement formalises the relationship and typically includes the advisory role and expected time commitment (e.g., 2–5 hours per month), equity compensation (usually 0.25%–1% of the company, vesting over 1–2 years), vesting schedule and cliff period, confidentiality and non-disclosure obligations, term and termination provisions, and whether the advisor has any decision-making authority (typically no — advisors advise, they do not direct). The FAST Agreement (Founder/Advisor Standard Template) by the Founder Institute is a widely used starting point, but you should customise it to your specific situation.

8. Intellectual Property Assignment Agreement

If any founder, employee, or contractor created intellectual property (code, designs, algorithms, brand assets) before the company was incorporated, that IP may not automatically belong to the company. An IP assignment agreement transfers ownership of pre-existing and future work product to the company. This is essential for investor due diligence — investors need assurance that the company owns its core IP. Key provisions include identification of the IP being assigned, representations that the assignor has the right to assign, warranties against third-party claims, and consideration (the assignment should be supported by adequate consideration — often the issuance of shares or options). Without this agreement, an early employee or co-founder who leaves could argue they still own the code they wrote or the designs they created.

9. Share Option Agreement (Stock Option Agreement)

Equity compensation is a key tool for attracting and retaining talent in startups. A share option agreement grants an employee or advisor the right to purchase shares at a fixed price (the exercise price or strike price) in the future. Key terms include the number of options granted, the exercise price (usually the fair market value at the date of grant), the vesting schedule (typically four years with a one-year cliff), the exercise window (how long the option-holder has to exercise after vesting, or after leaving the company), and tax treatment (ISO vs. NSO in the US; EMI vs. unapproved in the UK). This agreement should be part of a broader share option plan (equity incentive plan) that sets company-wide rules for option grants, exercise, and administration.

10. Terms of Service / Terms and Conditions

If your startup has a product or platform, you need Terms of Service (ToS) that govern the relationship between your company and your users or customers. ToS typically cover acceptable use policies, intellectual property rights (who owns what), limitation of liability and disclaimers, dispute resolution (arbitration, governing law), privacy and data-handling references (linking to your Privacy Policy), subscription terms, billing, and refund policies, and termination and account-suspension provisions. ToS are a contract — users agree to them by using your product. Make sure they are clear, fair, and enforceable in your jurisdiction.

11. Shareholder Agreement (Stockholder Agreement)

A shareholder agreement governs the relationship between the company's shareholders. It complements the company's articles of association (or bylaws) and covers issues like share-transfer restrictions (right of first refusal, tag-along and drag-along rights), board composition and voting rights, dividend and distribution policies, anti-dilution protections, information rights (what financial and operational data shareholders can access), deadlock-resolution mechanisms, and exit provisions (what happens on a sale, IPO, or liquidation). This agreement becomes critical once you take on external investors, as it codifies the economic and governance deal between founders and investors.

12. Board Resolution

A board resolution is a formal record of a decision made by the company's board of directors. While not a contract in the traditional sense, it is a legal document that authorises specific actions — issuing shares, approving option grants, authorising fundraising, appointing officers, approving major expenditures, and more. Board resolutions create a paper trail that demonstrates proper corporate governance, which is essential for investor due diligence, regulatory compliance, and legal defensibility. Every significant company action should be authorised by a board resolution, signed by all directors.