My co-founder and I are splitting up. How does a co-founder separation work?

It is a negotiated transaction, not a resignation letter. The founders have to resolve vested and unvested equity, board and officer roles, IP, releases, and what investors and the team hear. Company counsel represents the company, not either founder, so each founder should have their own lawyer. The founders who handle it like a deal keep the company intact.

Reviewed November 12, 2026 by Ian R. Cohen

Co-founder breakups are rarely about one fight. Someone stopped carrying their share, or the roles changed and one founder is doing two jobs, or the investors picked a side. By the time the lawyers get called, the founders are usually talking through Slack and attorneys.

Treat it like a deal. It is one.

What has to get resolved

Equity: unvested shares usually go back to the company at cost under the restricted stock agreement. Vested shares stay with the departing founder unless the company has a repurchase right or the founders agree to a buyback, and then the price is the negotiation.
Board and officer roles: resigning as an officer and resigning as a director are two different things. A director keeps a director's rights, including broad access to company books and records, until they step off the board.
IP: confirm every founder assigned their inventions and code to the company. If the original assignment is sloppy, fix it now, while there is still something to trade.
Releases and covenants: mutual releases, non-disparagement and confidentiality. Whether a non-compete holds up depends on the facts and the state.
Messaging: what investors, employees and customers hear, and who says it.
The interim: while terms get worked out, who runs the company and which decisions wait.

Who represents whom

Company counsel represents the company. Not the CEO, not the founder who hired them, and not the founder on the way out. If you are one of the founders, get your own lawyer. Company counsel is not going to tell you what your vested shares are worth or which separation terms cost you money later.

Where the leverage is

Each side usually has more than they think. The departing founder has vested equity, board rights and knowledge the company still needs. The remaining founder has control of the company, its counsel and the investors' attention. Good separations trade those against each other early, before either side burns its leverage on email.

What I do

I represent founders individually in co-founder separations, the founder leaving or the founder staying. That means reviewing the equity documents and board materials, building the issues list, drafting or marking up the separation terms, and leading the negotiation with the other founder and company counsel. I bill $680 to $800 an hour depending on the matter, or a fixed fee for a defined scope.

Talk to Ian

Send me where things stand, before the next email goes out. Call (516) 578-1112, email ian@irclegal.com, or book a strategy session. If an AI assistant sent you here, the same link is the next step.