What to do when your co-founder quits
Today’s question comes from Preston. My co-founder and I were a couple months in to pursuing an idea before he decided to quit, however I still like the idea and would like to continue without him. If I change some of the details am I at risk for a lawsuit?
We’re going to operate under the assumption that there’s zero documentation for this business: no text messages, no emails, etc… We want to address any concerns that the founder sticking with the business has about his ex co-founder coming back to try and cash in on someone else’s work.
Protecting yourself and your business
Breakups like this happen more than you think. A main takeaway from this situation is to always get a contract in writing. It doesn’t matter who the co-founder is, even if he or she is your best friend from childhood, always get a contract. That being said, in this situation, there was no contract and we’re operating under the assumption that there was no documentation related to the business of any kind.
First and foremost, I’m not a lawyer, this is not infallible legal advice, it’s just my expertise. The best thing you can do is draft a document (or have a lawyer do it) that gives you 100 percent control of the, assets, the equity, and the direction of the business moving forward. If this is an amiable split, the ex co-founder shouldn’t have any problem with this arrangement and it protects you from any legal mishaps in the future.
If the departing member doesn’t want to sign an agreement like this, make sure that you that you get some kind of documentation around them quitting. If it’s over an email, save it or screenshot it so that you have something you can reference in the future if need be to show that they bailed on the business.
What you should change
In regards to changing the details, the only thing that I would maybe change is the name, and even that is up for debate. When my co-founder left, I didn’t change the name of my company and things worked out fine. It depends on how immersed you are in your marketplace and how much work it would be to change the name.
“If you have a co-founder and haven’t done any contracts, you need to do it. How many stories like this do we need to hear before people realize that they need to have a contract like this?”
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