Founders often make a critical mistake when they setup a company: they forget to create a vesting schedule for themselves.

Usually it happens for a practical reason. When founders fill out the incorporation documents they list themselves as shareholders and, by default, these shares have no restrictions. An entirely separate contract must be drawn up and signed for the founders to create a vesting schedule. This costs money.

The mistake can also happen for the same reasons that engaged couples avoid prenuptial agreements. No one wants to imagine a future breakup and, depending on the partners, the act of discussing it may be enough to turn theory into reality.

It can also happen because founders do not think they should have to ‘earn’ a company that they have created. This is the usual reaction when an investor asks founders to sign a vesting contract.

But there are reasons you should have to earn your company. Ask the founders of Tapulous.

Bart Decrem and Andrew Lacy founded GoGo Apps, Inc. in January of 2008. Mike Lee joined a few months later as a co-founder and they renamed the company Tapulous. Today, Tapulous is the maker of TapTap Revenge, one of the most popular applications ever launched for the iPhone. They have over 17 million users, have celebrity investors and have licensing deals with artists like Lady Gaga and Metallica. They are less than two years old, are profitable and, by most measures, are a runaway success.

What’s missing from this story are the events of August 2008. That was when Mike was forced out of the company and most of the engineering team left with him. By all accounts this was a case of founders with different visions for the company but, given who was involved and the stage of the company, this was a potentially fatal blow to Tapulous. If an ownership dispute arose at such an early stage, the cost and distraction of a lawsuit would have killed the company.

If the Tapulous founders had failed to create a vesting schedule for Mike he would have walked out as a large shareholder in the company. Mike might have been happy with that situation but none of the other shareholders would have been. They would have been left with a few options:

1) Dilute Mike until his percentage is negligible
2) Try to dissolve the company and transfer the assets and people into a new entity
3) Buy him out
4) Grin and bear it

The first two options could have turned a domestic dispute into a legal battle.

However Tapulous appears to have been designed with this situation in mind. Bart and Andrew would have to rebuild the company but they would not have to do it in the shadow of a legal threat.

Each of the departing engineers would have signed an agreement when they joined Tapulous that granted them company stock options based on a vesting schedule. As new employees they would not have owned any stock – they had not earned it by staying with the company for an agreed upon length of time. When they left after only a few months, they left empty-handed. They can always point to their role in creating TapTap Revenge but that’s about it.

Mike’s situation is trickier. Founders vesting must be structured different than normal employee vesting because they need to own the stock today, not after a year or two of employment. If they used the same structure as an employee plan they would run into a situation where the company either has no shareholders (impossible in most states) or where all the shareholders are outside investors.

The solution to this problem is Founders’ Stock. These are special shares held by the founders that have a key restriction: if a founder leaves the company the stock is returned to the company. The restrictions on these shares are removed based on an agreed upon schedule, creating a similar effect to vesting. This lets the founders maintain the voting power that comes with being a shareholder but protects everyone in case one of them leaves early.

It’s possible that, because Mike joined at a later date, his shares were structured more like a normal employee award. It is also possible that Mike was bought out – but this usually comes with a gag order, which doesn’t seem to have been the case.

Most likely either the Tapulous founders or their advisors were savvy enough to have to created a Founders Stock Plan. Tapulous might not be here today if they had not.