Small Business


Intellectual Property

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 March 25, 2021

Anatomy of a Small Business Contract Strategy

Small business owner signing a contract

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.

Non-disclosure Agreement (NDA)

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.

Employment Agreement

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.

Consulting Agreement

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 contract 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.

Vendor Agreement

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.

Commercial Lease Agreement

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.

Sales Agreement

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.

Terms of Use/Privacy Policy

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.

Advisor Agreement

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, which is why Legalshield is here to help. Small Business Legal Plus members can have a business lawyer craft contracts up to 25 pages for only $250. Learn more about LegalShield’s Small Business Plans.


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