Writing a Partner or Co-Founder Agreement in Australia
A handshake can seem enough when two people trust each other, yet a growing business quickly turns informal assumptions into financial and operational disputes. A partner or co-founder agreement converts those assumptions into recorded commitments about ownership, authority, money, intellectual property and future decisions.
Founders should not draft it while assuming it is merely paperwork. It is a shared operating compact that can preserve goodwill by making responsibilities visible and giving everyone a fair process when priorities change. It also gives investors, banks and advisers evidence that the founders have thought through governance.
This guide explains how to prepare a practical agreement for a consulting practice, product company, retail business or online enterprise. It covers terms that deserve careful attention, from equity vesting to deadlock, and shows how to turn each decision into workable language.
Because legal, tax and employment obligations differ across jurisdictions, local advice can be valuable. A lawyer can review enforceability, while an accountant can model cash flow and ownership consequences. The agreement should fit the chosen structure.
Begin with the partnership's purpose
Start with a statement of purpose both founders can repeat. Describe the problem, customer group, revenue model and intended market, then set measurable first-year objectives. If expansion is planned, name the cities and channels: Melbourne and Sydney have different customer habits, operating costs and competitive landscapes, so one local playbook may not fit both.
Translate the vision into an operating plan. Record who leads product, sales, finance, marketing and compliance, with expected hours, deliverables and response times. A full-time founder should not carry the same responsibility as someone contributing limited nights while working elsewhere. If one person handles a regulated function, state the qualifications and budget required.
Set roles, equity and vesting
Ownership should reflect each contribution, not simply who had the original idea. List cash, equipment, intellectual property, customer relationships and labour separately, then assign each founder a percentage. Record the calculation so the split can be explained later. If the venture operates through a company, its registration with ASIC and the company constitution will shape how those interests are documented.
A founder working full time for three years contributes differently from one contributing a modest sum and occasional advice. Set vesting rules, such as a four-year schedule with a cliff, and define what happens to unvested interests when a founder leaves. Use objective events for accelerated vesting, including a completed sale or funding round, rather than vague promises.
Link vesting with buy-sell protections. A shareholder agreement can regulate transfers, permitted pledges and exits for a company, while other structures need different wording. Tax consequences can be significant, so obtain local advice before using “good leaver” or “bad leaver”. Those labels should attach to objective conduct standards, not personality or a disagreement that could have been resolved earlier.
Establish decision-making and operating rules
Create three decision levels: routine choices, major commitments and reserved matters. Give each a threshold and time limit. Ordinary spending may sit within an approved monthly budget, a large supplier may need joint approval, and changes to the business name, borrowing or ownership may require unanimous consent. Record vote counts and what happens when a vote is tied.
Set communication as well as voting rules: weekly meetings, monthly reporting and an escalation contact. For online sales, ecommerce partnership guidance can help with channel ownership, returns, fulfilment and shared customer data. Keep these details beside the agreement so operational habits do not create unwritten expectations.
Protect intellectual property and information
Identify every asset the founders expect the business to own, including code, designs, content, domains, product plans and brand elements. Assign pre-existing work to the business through a signed licence or transfer, and include a further-assurance clause so a founder provides documents needed to prove ownership. Specify what each founder may continue to use, for how long and on what terms, particularly where personal portfolios or consulting work could overlap.
Define confidential information by category and include customer lists, pricing, financial data, credentials, product roadmaps and business plans. State the permitted purpose, access controls, return or deletion process and the period that obligations continue after departure. Where the Australian Privacy Act applies, require compliance with it and clarify who controls customer data. Add a process for reporting a suspected breach or loss of a password.
Build the financial framework
Attach a simple budget showing expected revenue, costs, founder contributions and the point at which the business needs external finance. State who can authorise expenditure, who receives invoices and which bank account is used. Require two authorised signatories for meaningful payments, regular statements and a review of actual results against budget. These controls protect cash without creating unnecessary bureaucracy for a small team.
Set rules for founder drawings, salaries, loans and distributions rather than leaving every payment to custom. Distributions must be lawful, and any decision should account for tax, working capital and debts. Australian invoices may need GST included when the business is registered, and the usual company financial year ends on 30 June. Clarify how BAS lodgements, tax reserves and year-end accounts are funded, and whether disputed revenue is held until the issue is resolved.
Separate employment from ownership. If a founder is an employee, document duties, pay, leave, termination terms and superannuation, and comply with applicable Fair Work requirements, awards and the National Employment Standards. Paying wages or calling someone a partner does not remove employment obligations. For practical guidance on cash management and planning, SCORE Nashville's free mentoring workshops offer nonprofit business education that founders can adapt to their own records and local professional advice.
Plan for exit, conflict and change
Build an exit pathway before anyone wants to use it. Define notice periods, permitted voluntary exits and involuntary grounds such as fraud, serious misconduct or prolonged failure to meet agreed responsibilities. Use an independent valuation process where appropriate, then state how the price is paid, how business debts are handled and when control and assets transfer. Avoid formulas based only on revenue or profit when those measures can be changed by the departing founder.
Protect the business and the departing person's lawful interests. List handover duties for passwords, files, stock, intellectual property and key relationships, while allowing reasonable time to settle outstanding expenses or disputed amounts. Address death, incapacity, bankruptcy and a change of personal circumstances, including where family or dependants may be affected. A trusted contact or executor may need practical access to records and instructions for exercising options.
Create a staged dispute process that begins with direct discussion and moves to a facilitated meeting or mediation before litigation where appropriate. Set deadlines, nominate an independent adviser and allocate professional costs. Preserve access to urgent relief, such as an injunction to stop misuse of confidential information, and confirm which courts or forums have jurisdiction. Keep the tone objective so the process resolves a business issue rather than rewards personal escalation.
Finalise and review the agreement
Give the document a clear structure: definitions, business purpose, contributions, ownership, management, finances, intellectual property, confidentiality, exits, dispute resolution and general legal terms. Use schedules for the budget, responsibilities, intellectual property register and key policies. Check that names, company details and dates match all other records, and that terms such as “material breach”, “confidential information” and “reasonable notice” have a workable meaning.
Have an Australian lawyer review the draft independently, particularly if the founders are not using the same adviser. Confirm the correct entity and execution method, including whether counterparts and electronic signatures are appropriate. Signing may create obligations that extend beyond the founders, so each person should understand the whole document rather than reviewing only the sections about their own duties.
Store a signed copy securely and implement it immediately. Update bank mandates, ownership records, insurance, payroll arrangements and access credentials as required, and give each founder the agreed reporting pack. Schedule a review after the first year and whenever a major funding round, product, location or team change occurs. An agreement works best as a live record of how the business is run, not as a document created only for signature day.
Turning the conversation into a document is easier when each founder has one page outlining goals, contributions, ownership, decision rights and exit preferences. Reconcile those pages, settle the open points and obtain legal review before signing. A clear agreement gives a new venture a stronger foundation and gives its founders a fair way to manage change.
Book a free one-on-one session with a SCORE Nashville volunteer business mentor to test the commercial assumptions, organise the records and prepare the agreement for professional review. Bring the founder responsibilities chart, first-year budget and proposed ownership split, and use the session to turn them into clear commitments before the business moves forward.
