The earliest stages of your business are about setting your nascent company up for success: making the right decisions and avoiding the costly mistakes and setbacks difficult to overcome. Businesses can help to protect themselves against those types of mistakes with written, signed contracts. These fundamental agreements are too important to be ignored or left to guesswork. Below are the most common contracts your business will likely need, and why.
To keep your most sensitive proprietary information from getting out into the public, you should have non-disclosure or confidentiality agreements with others signed before sharing anything. A NDA isn’t a blanket agreement for all information discussed or disclosed; the document itself defines the categories of information covered and excluded, as well as the timeframe that the information has to remain private. Nor are NDAs one-way; a mutual NDA protects both parties when each side is revealing sensitive information to the other.
For meetings with potential customers, partners, employees, contractors, and even suppliers, have an NDA ready to protect your information.
When hiring key people, you don’t want to rely upon handshakes any more than you would with any other agreement. With an employment agreement, you are detailing the particulars of what is offered and what is expected with that prospective employee. Most agreements include salary and benefits; work responsibilities; and confidential information protection, plus the conditions by which an employee can be terminated.
An important difference is whether a person is employed at-will or not, because an at-will employee may be dismissed at any time, without paid notice, as long as the reason is legal. Employment law varies state-by-;state and getting help with employee agreements is advisable.
If you’re looking for short-term or project-specific help, you would not hire a permanent employee. Instead, a temporary consultant or fixed-term contractor would execute a written agreement. This consulting agreement should clearly explain the terms of the arrangement and expectations, including start and end dates, due dates, compensation, confidentiality, and crucially, ownership of intellectual property created under that contract.
If you’re purchasing or selling goods or services, a vendor agreement between the two companies is a must. The agreement should include what is being provided or sold (and in what condition); the duration and any milestones; and the price agreed upon. Also include the details for contract termination by either party and how disputes are to be handled.
Leases are not unfamiliar to anyone who’s ever been a tenant, but commercial leases differ in key ways. Commercial leasing comes with regulations and governing laws, as well as zoning concerns. As the lessee, you also have to think about taxes, insurance, maintenance and utilities on a larger scale, and which of those expenses are covered by the landlord and which are your responsibility. There’s also the question of alterations, if any; for example, what if you want to put a sign up on the building? As with any contract, you want everything to be in writing.
Like a vendor agreement, a contract with a customer to sell goods or services should be simple and specific. In an agreement or letter, clearly outline what you will provide at the stated price and the timeframe. You are also providing the buyer an opportunity to inspect the goods along with your payment expectations, including what happens in the event of non-payment.
Because most businesses undoubtedly have a website that informs as well as sells, you will need a Terms of Use (sometimes called Terms of Service) that includes standard language around appropriate use plus sometimes additional language as a vendor. In addition, you will need a Privacy Policy that stipulates what information your site collects and how that information is used and/or kept private. Your website should require users to agree to the terms of use as well as your privacy policy.
It’s recommended to have an agreement with any advisors on a board or acting as mentors, despite the fact that they aren’t employees or consultants in the traditional sense. Your advisor agreement should lay out expectations, as well as any compensation. Also, advisors should sign confidentiality agreements surrounding private information, and assign any intellectual property created to the company itself. Advisors should also be restricted from representing your company for the purposes of contracting or other agreements.
Contracts are difficult to try and sort out on your own. It's important that you understand who is bound by a contract and what they're bound to do. Contracts can be unilateral or bilateral, and specific wording defines responsibility and liability. LegalShield is here to help. Learn more about LegalShield’s Small Business Plans.
Written and maintained by the LegalShield content team, covering legal and identity protection topics for individuals, families, and small businesses.
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