How Does a Founder Get Fired?

Fired as the Founder — totally a dream or a nightmare come true?

August 6th, 2019   |    By: Wil Schroter

It's 3:35 A.M. We wake up in hot sweat so wet we've soaked our Night Ranger vintage crop top right through. We had this awful dream that we were somehow fired from our own company.

"Wait. I'm the Founder — how can I get fired?"

If you own 100% of the voting stock and have no other shareholders — you can't.

Your totalitarian rule is safe, El Presidente. However, the moment we have additional shareholders in the mix, the game can change quickly.

Multiple shareholders, especially investors, typically introduce provisions in the Operating Agreement of the company that "protect" the shareholders from wrongdoing by the officers of the company.

Does that mean the janitor can initiate a palace revolt and overthrow us? Probably not. But it does mean a particularly hostile cabal of investors, co-founders, and board members could give our reign a shortened term.

"Can I get fired even if I own most of the company?"

It depends on how the company is structured and what agreements are in place.

For example, it's possible for a minority investor to have a provision in the company Operating Agreement (or other bylaws) that states they have the power to remove any officer of the company. Often this is set up as a last resort measure in case the Founder goes off the reservation (it happens, so it's there for a reason!)

Now, that doesn't mean we'd lose our equity (in most cases), but it would create a situation where we could lose our job as an officer of the company.

"Would I lose my equity if I were fired?"

Depending on how our stock is set up, we may be on a vesting schedule. Again, this is typically only set up if we have investors in our deal, but if we are fired (for cause) there may be the case that any remaining stock that we had that wasn't vested will be forgone.

If we're fired without cause — if, for example, there was simply a reduction in workforce due to financial problems — that may trigger our vesting differently, but that would be something we'd have to examine on a case-by-case basis.

In most instances, however, losing your "job" (your salaried role) and losing your equity isn't the same thing.

In Case You Missed It

How do I fire a Co-Founder? Let's talk a little bit about what a "co-founder divorce" looks like, and what we can do to prepare if and when that time comes.

What is an Operating Agreement? Everything you need to know to set up a solid operating agreement and get your startup on the road to success.

Feeling like a Founder Fraud? (podcast). When was the last time you felt like you had no idea what you were doing? Join Wil and Ryan as they break down why feeling like a fraud is actually a normal part of Founder life.

About the Author

Wil Schroter

Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes BizplanClarity, Fundable, Launchrock, and Zirtual.  He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement).  After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do.  He's a seasoned expert at starting companies and a total amateur at everything else.

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