What paperwork do I need to bring on a new co-founder?
EquityCo-foundersGovernance
Adding a co-founder to a corporation takes a board consent approving the issuance of shares, a restricted stock purchase agreement with a vesting schedule, payment of the purchase price, an 83(b) election filed within 30 days, an invention assignment agreement, and an updated stock ledger and cap table. Skip any of them and you have a person who believes they are a founder and paperwork that says otherwise.
The board consent
Directors approve every issuance of stock. The consent records the number of shares, the price, the form of payment, and why the board considers the price fair. If the company already has real value, the price is no longer par, and the answer to "Can my company issue more shares to an existing founder?" explains what that means.
The stock purchase agreement
This is the founder's actual contract for the shares: the vesting schedule, running from their own start date, the company's right to buy back unvested shares if they leave, transfer restrictions, and any acceleration. The founder then pays, by check, wire or property the board has valued. The invention assignment covers what they build from now on, and anything they built before joining that the company needs should be assigned by name.
The 30 days
The 83(b) election is due at the IRS within 30 days of the date the shares are transferred, and the deadline cannot be extended. Miss it and the founder is taxed as each tranche vests, at whatever the shares are worth then.
Why the option pool is the wrong place
It is tempting to grant the new founder options from the equity incentive plan because the plan already exists. Options are not stock. They carry an exercise price, they usually lapse on departure, an 83(b) election is not available until they are exercised, and investors read a founder holding options as an employee. The usual practice is restricted stock for a founder, with the pool kept for hires.
Arabella's Delaware formation packet papers the founders present at formation. A founder who joins afterwards needs a fresh board consent and a stock purchase agreement. The purchase agreement is in the library; the consent is not a template today, and Ask Arabella can walk through what it has to say.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.