When it comes to starting or co-founding a business with some other people, one of the most important issues that you will need to sort out as a matter of urgency is to establish the ownership structure of the business.

This is very important even before you go ahead to float a Ltd liability company with your partners.

If you have ever enquired about registering a Ltd liability Company (LLC) from me, You will recall that there are routine questions that I always ask before going ahead with the registration process.

The questions include the following:

• Who is the actual owner of the business?

• Do you have partners or Co-founders?

• Do you intend to be equal partners or shareholders in the business?

The reason I constantly ask these questions is to enable us to determine the ownership structure in the business.

If you are thinking of partnering or collaborating with other people especially if you run a tech-driven or tech-enabled business, please note that it is not just enough to incorporate a Ltd liability company with the CAC and have a founders’ Agreement because Barinaada Legal said so.

It is particularly important to clearly map out the ownership structure of the company in your Founders’ Agreement.

It is important for your agreement to answer these questions:

1. What is each partner bringing to the table in terms of their roles and responsibilities?

2. What is the Capital contribution of each partner?

3. Who gets what percentage of the company?

4. Are the shares of each partner subject to vesting and if yes, for how long should the shares be vested?

5. Can a party freely transfer his shares to a third party or are there restrictions to the transfer?

Understanding these questions and providing answers to them will help you to clearly establish the ownership structure of the business before incorporating it with the Corporate Affairs Commission or the relevant regulatory body in your country.

It will help you to avoid unnecessary misunderstandings between you and your partners in the future.

If you have already Co-founded a business with some other people without having a clear ownership structure, you can correct your mistake by having a thoroughly drafted Founders’ Agreement with clear ownership terms and conditions going forward.

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