Founder’s Prenup SOP: Have the Hard Conversation Before You Sign
This is a Small Business SOP — a free, do-this-today standard operating procedure pulled from a real operator on the Unscripted Small Business podcast. This one comes from Phil Crowley of Crowley Law, a boutique firm for life sciences and technology entrepreneurs, run by a former research physicist who spent 30 years in the Johnson & Johnson Law Department.
One of his clients downloaded an operating agreement off the internet to save money. It turned out not to be an operating agreement, so he could not remove a partner who had stopped working, and he nearly lost the $50,000 he put in. None of that was a legal problem at the start. It was a conversation nobody had. Run it this week.
The Play — One Line
Before any paperwork exists, sit down with your potential co-founder and answer four questions out loud: what is this business for, what is each of us putting in, who does what, and how do we split if it ends. Then have a lawyer paper it.
Why this matters
In Phil’s words: “When people are in agreement and they’re all enthused about starting a project, they don’t want to think about it. It’s like getting married. And so it’s good to have a prenuptial agreement. And the prenuptial agreement is a founder’s agreement.” The moment you least want to discuss the ending is the only moment you can still discuss it cheaply.
He is blunt about what actually kills these companies: “I’ve seen so many businesses dissolve, not because they didn’t have good ideas, but because people got so angry with each other that they did things that were in their own worst interest economically in order to spite the other person.”
The 6 Steps
1
Agree what the business is actually for
Grow it fast and sell, or keep it as a lifestyle business you run part-time. Say the answer out loud. Two people can want opposite things and never find out until it is expensive.
2
Put numbers on the commitment
How much money is each of you putting in, how many hours, and over what time period. Phil’s question is whether you are both expected to put in boatloads of money, or whether one of you is the idea person. Vague answers here become resentment later.
3
Split the work in writing
Is one of you the idea person with the patented technology while the other works the business every day? Write down who owns which job. The vodka distillery failed on exactly this: one partner was supposed to distil and did not.
4
Answer the exit question out loud
If we decide to part ways, how would that look? Nobody wants to ask it while everyone is excited. That is exactly when to ask it, and it is the question that would have saved Phil’s client.
5
Write the business plan knowing it will be wrong
The document is not the point. “The business plan will be wrong. But the business planning process forces you to really think critically about who’s going to do what and what your financial constraints are.” Do it with your partner, not alone.
6
Take it to a lawyer who will actually talk to you
Ask a few. “If they become hostile and have the feeling that they are the expert and they can’t be bothered to talk to you, that’s a good indication that that’s not the right lawyer for you.” Ask other founders in your network who they use, and check whether a technology accelerator near you has lawyers who give time to founders.
The numbers behind the play
All four come from the one story Phil opened the episode with. None of them are hypothetical.
$50,000
what one founder nearly lost
0
legal routes he had to expel the partner
1
document that was not what it claimed
4
questions to settle before anybody signs
Take the whole SOP with you
One printable page: the play, the steps, and a fill-in checklist. No email required.
