Co-founder disputes are common in the business world, whether in television production, restaurants, real estate,or tech start-ups. With the staggering amount of money that can be at stake in today’s tech companies, founders should exercise caution. The best of friends and the most cohesive of partnerships can end in a bitter legal battle unexpectedly. A recent Los Angeles Times article, titled “Co-founder feuds at L.A .tech start-ups show how handshake deals can blow up,” recounts several telling tales of business start-up angst. The article analyzes recent tech-based businesses that began with a handshake and ended with relationship-ending conflict.
Entrepreneurs should consider entering into a prenuptial (“prenup”) agreement to avoid such a dispute. A prenup establishes the property and financial rights of each spouse in the event of a divorce. Figuring out how to divide property and assets should a company or partnership dissolve may be a smart way to start a business. Consult counsel and think through all the potential issues.