4 Contract Agreements You Definitely Need In A Business

It’s not about ideas. It’s about making ideas happen. ~ Scott Belsky (Tweet this)

Building a business is a legal pursuit. Some people cringe at the thought of this, but ultimately it’s your job to protect that which you’ve built. One way to protect yourself and your business is with a contract agreement. These documents lay out exactly what’s to be expected, which boundaries are to be respected and which ramifications are in order should anyone break the contract agreement.

Often times, a contract agreement also protects your clients and customers. Essentially, the entire process goes both ways. Both client (or contractor, vendor, etc.) and company agree on what is to ensue and how. A contract agreement is meant to lay out the expectations and deliverables, not necessarily bring down the hammer on someone.

Below you’ll find a list of common clauses and ideas to add to the contract agreement found within your own business. Please note that this list is no way exhaustive and the type of contract agreement you need may depend on the type of business you run. As always, make sure to consult with an attorney if you have any questions.

1. Operating Agreement or Partnership Agreement

An operating agreement (or a partnership agreement if there’s more than one member) is the legal document that outlines all the provisions for running a company. A partnership agreement is a written agreement between two or more individuals who join as partners to run a for-profit business.

A partnership agreement typically states the following:

• The nature of the business.
• The capital contributed by each partner.
• The rights and responsibilities of each partner.

A partnership agreement also outlines what happens if one of the partners dies or the company dissolves. While it may not be fun to think about these things, this is one of the most important documents you can have in your business—especially if you’re not the only person involved in the venture. Some states in the U.S. also require that you have this kind of agreement by law.

The good news is you don’t necessarily have to hire any attorney to draft one up. The local bar association website may have some templates you can use. However, if you’re incorporating anyway you might as well either hire an attorney or use something like LegalZoom to create the agreement.

2. Contractor Agreement

If you plan on working with people who are not your employees it’s imperative that you have a contractor agreement. This has become more important than ever as the economy moves toward accepting and hiring more contractors for work. It’s a scenario that works well for both contractors and companies and is a viable solution for outsourcing on a budget.

Using contract workers are not at all the same thing as hiring a full-time employee. The benefits lie in the fact that as a company you won’t need to worry about giving benefits, taking out taxes, etc. As such, it’s important to lay this out in your contract agreement. Additionally, you’ll want to discuss the scope of work, deliverables and timeline for the project you’re contracting for.

Chris Ducker, author of “Virtual Freedom”and outsourcing expert, has a wealth of resources you can use in your contractor agreement.

3. Non-Disclosure Agreement

A Non-Disclosure Agreement—otherwise commonly referred to as an NDA—is an agreement between two or more parties which signifies there is a confidential relationship between all parties. In other words, it’s a contract agreement that states you can’t make information that is shared between the parties, public. This includes client lists, projects, earnings and pretty much any business process.

This type of contract agreement is commonly used when two companies are about to do business together but can also be used among partners and with contractors. This gives all parties incentive not to leak sensitive information in an effort to avoid legal ramifications.

4. Terms of Service

You may see this particular contract agreement posted on several websites that you visit. A ToS typically outlines how a user (clients, customer, etc.) is to use the website (service, product, etc.).

For instance, a ToS can have a disclaimer that waives the company of responsibility in some instances—like a health coach whose ToS explicitly states on their blog that readers are trying the advice given at their own risk and should always consult a medical professional.

A ToS can also state how information is collected and why—such as emails when someone opts into an email list. Additionally, a ToS typically explicitly states that the material being used belongs to the company. This includes copyrights, trademarks and other forms of intellectual property.

Here is a sample ToS from Wisdom Times, that you are free to use.

Final thoughts on contract agreements

An entrepreneur is someone who has a vision for something and a want to create. ~ David Karp (Tweet this)

When most people think of legal documents they tend to immediately get a headache. The reality is these documents are necessary in order for you to protect yourself, your company, your partners and anyone else who may somehow be involved with your business.

Additionally, this doesn’t have to be a pain or cost you thousands of dollars in attorney’s fees. In many of these instances there are resources and templates available online which can help you create the contract agreement you need. Furthermore, it’s much wiser to protect yourself now than have something happen down the road—that’s when the real legal headaches arise.