Many small businesses underestimate or simply aren’t aware of the importance of contracts. Contracts are legally binding agreements between you and a second party that protect your tangible and intangible assets. Let’s dive into the do’s and don’ts of contracting and what small business contracts you require.
General Do’s and Don’ts
Do identify an attorney who will advise you on the type of contracts you require for your business.
Don’t sign any contract without reading every word, including the exhibits and appendices.
Do ensure that all terms are clear, specific, and easy to track and measure.
Don’t agree to terms and conditions that you don’t agree with or don’t understand.
Do have your attorney look over your contracts before you sign.
Don’t sign a contract before doing your due diligence on the person you are contracting with.
Do hire a lawyer or use an online service or tool to draft your contracts.
Don’t enter into a contract if you aren’t crystal clear of the consequences of contract violation.
What Small Business Contracts Do You Require?
This will vary depending on your individual needs, but here are the most common contracts that startups and small businesses require beyond brick-and-mortar leases:
#1 Sales Contract
This can be as simple as an invoice or any document that acts as a bill of sale in exchange for money, product, or services. This can also include purchase orders and vendor agreements.
#2 Service Contract
This includes external parties you hire to perform any service for you, either on-site or remotely. It should include the terms of service, warranties, limitations, and what “delivered” or “finished” looks like.
#3 Indemnity Agreement
This is a contract that ensures you aren’t held liable if a user is harmed. For example, if you sell a drill bit and someone injures themselves while using their drill. However, indemnity agreements don’t protect from faulty, fraudulent, or misleading product safety issues.
#4 Employment Contracts
Offer letters and employment contracts should outline factors such as job title, job duties, salary, bonus structure, time off, and more. You may also want to include non-competes, confidentiality clauses, and IP protection. This includes signing to agree to the rules and regulations of your employee handbook.
#5 Independent Contractor Agreement
External subject-matter experts are essential for filling skills gaps and optimizing your labor dollars. Have your external bookkeeper, accountant, HR team, marketing firm, IT expert, consultants, and freelancers sign relevant agreements—including the fee structure, terms of service, and scope of work required.
#6 Asset Protection
Confidentiality and non-disclosure agreements may need to be signed by employees, vendors, and contractors alike. For example, to ensure that the company you hire to prototype your design doesn’t steal your design.
#7 Digital Privacy
From your website cookies policy to whether you sell or share your email list, and providing a Privacy Policy and Terms of Use to all who engage with your business through digital channels.
How to Draft Your Contracts?
Now that you have a better idea of what small business contracts you require, you need someone to draft your contracts.
Attorney—hire a local attorney or utilize freelance sites such as Fiverr or Upwork to identify paralegals and lawyers who can draft contracts on your behalf.
Online tools—utilize online contract templates and tools for generic contracts such as Capterra, PandaDoc, or HoneyBook.
Contract management—with an increased amount of remote contractors and remote employees, comes an increased need to e-sign documents. A top pick for securely signing and storing contracts is DocuSign, which also provides some contract templates.
Check back to the TEK REMEDY blog soon for additional small business tips!
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