When you first start a company, people ask, “Do we need to enter into employment agreements with ourselves?” Generally speaking, the answer is no. You can come to an agreement on how much compensation you are going to make, when you are going to make it, how much capital you are going to raise, and what is going to happen when you raise that capital. You set your expectations properly, but there is no need to make employment agreements when you are starting out. When you go out to raise money, you should have those employment agreements in place. They should be at-will employment agreements, which enable the company board of directors to decide whether or not they want to fire certain employees. The good part about that is that you do not get stuck with the people you do not want. The bad part is that you, the founder, are not exempt from this evaluation process and thus hold an equal possibility of losing your job. The Board of Directors that you put in place must be smart enough to know whether or not that should happen. If you want to have job security in your new company that you have started up, then you put in formal provisions in a shareholder agreement between the parties or in separate employment agreements with each of the principals who started the company. You lock in your terms and you lock in the amount of money you are going to make. Word of caution: At some point in the future, those agreements may not be the right agreements and you have to renegotiate or you are in a battle over them.
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