This morning was my son’s first day of school and he was extremely excited to get going. In fact, he would have ran across the street to his school without looking if I hadn’t stopped him. His elation overtook his ability to evaluate peril. This reminded me of how entrepreneurs can rush into a startup without taking the time ascertain and address potential issues.

For example, co-founders can let their passion and enthusiasm for their startup (and trust in their co-founder) substitute for practices that will protect and enhance both them and the startup company. I wrote an article about issues co-founders should discuss titled “Keep Your Startup Co-Founder Closer.” Check it out if you haven’t already.

If your startup company launches with more than one founder and your startup plans to eventually be acquired or seek venture funding, your startup’s founders stock should vest over time according to a vesting schedule.

Founding teams might not stay together. And having a missing founder or two with a nice chunk of your startup’s common stock is not a scenario your startup wants when it comes time for an acquisition or venture capital financing.

So instead of the founders getting all their shares of common stock on Day 1, the founders get their stock according to a vesting schedule. The standard vesting schedule for startup companies is four years with a one year cliff and monthly vesting thereafter until the founders reach 100%. The one year cliff means that the founders do not get vested with regards to any common stock until the startup’s first anniversary. Thereafter, the founders get vested every month at an amount equal to 1/48th of the their total common stock.

If a founder leaves before the startup’s first anniversary, the founder leaves without any common stock. If a founder leaves after 15 months, the founder will have 31.25% of his common stock vested (25% after the first year, plus the 2.083% vesting each month for 3 months). Thus, the missing founder leaves the startup with much less shares than if the founders stock had vested immediately. This makes it easier to get the necessary approval (and other issues) to go forward with an acquisition or venture capital financing.

Sun Tzu is generally credited for coming up with the phrase, “Keep your friends close, and your enemies closer.” He obviously never launched a startup and got shafted by a co-founder.

Entrepreneurs often believe their startup company faces legal threats from only external sources. And that’s a big mistake. Instead of worrying solely about some 3rd-party stealing your business idea or a “slip and fall,” your startup company’s top legal priority should be the reduction of its internal legal threats: co-founder disputes.

You can start by examining every aspect of the co-founder relationship. Your startup company could be ultimately doomed by a co-founder dispute, as even small disagreements can systematically erode the core of your company. Therefore, at the earliest time possible, sit down with your co-founder(s) and talk about issues like:

• the goals each of you have for the startup;
• the goals each of you have for yourself;
• duties, job descriptions, and hour commitments;
• who pays for what;
• who gets paid first and why;
• what happens if one of you wants out;
• what happens if one of you wants to sell the company, raise capital, or end it;
• what happens if one of you gets disabled or dies;
• what happens if things take longer than expected;
• whether launching other startups, i.e. “moonlighting,” is ok; and
• how small, medium, and large decisions will be handled.

This is not an exhaustive list of topics and by no means whatsoever will their discussion be easy. If it is easy and everything sails through without a hitch, someone’s holding back and you’ve all wasted your time. And for the love of high-speed internet and all things Web 2.0, do not think being friends or relatives reduces the need for these difficult/awkward conversations. In fact, if your co-founder is a friend or relative, that should trigger even more issues and discussions. Because now you have more to lose than just a company and your (or someone else’s) money.

After you have discussed everything that needs to be discussed, DOCUMENT-DOCUMENT-DOCUMENT. Make sure your startup company documents reflect all of your discussions. Don’t leave anything out just because you and your co-founders already talked about it. Take nothing for granted because memories will inevitably differ.

Once you have discussed and properly documented your co-founder relationships and thereby protected your startup company’s core, then you can focus on external legal threats.

Today I’ll get right to it: You need to have good communication with your partner from the start or else you’ll fumble your initial corporate documents.

For example, if a multiple-owner corporation’s bylaws are less than 7 pages, that tells me the corporation’s co-founders did not have enough discussion about how their corporation should be managed, operated, transferred, sold, or liquidated. Or worse, they did have the requisite discussion but failed to implement their discussion into their corporate documents.

Since most startup company co-founders are entering into a venture with each other for the first time, the natural tendency is to avoid anything that may rock the boat. Who wants to squabble with their partner from day 1? Alternatively, enthusiasm and optimism for the new venture precludes the co-founders from discussing negative issues. Who wants to talk about “failure” when you are just starting out, right?

Both approaches have negative consequences for your initial corporate documents. Not wanting to rock the boat and unwillingness to talk about negative issues will prevent your corporate documents from becoming a comprehensive set of rules for your startup company. And when something happens with your startup company, your corporate bylaws may not be of any help.

So lay it all out on the table from the start. Discuss what should happen if one of you gets an offer to sell your shares. Talk about your respective roles in the corporation and how your corporate documents should reflect and protect such roles. And then implement your discussions into your corporate bylaws. Not only will such frank discussion help ensure your initial corporate documents better fit your startup company, but it will also lay the foundation for future open communication between you and your partner.