If you own a business, it is imperative that you take precautionary measures to protect it legally. In other words, you need a great business attorney and contracts that protect your best interests. There is no easy answer for what legal agreements are the most effective, because every case is different. However, there are three main types of contracts that most businesses can benefit from having in place.
If you own the business with another party or parties, it is important to have a written contract between all of the co-owners. This is true whether you are a LLC, partnership or corporation. Common examples of this type of agreement are operating agreements, shareholders’ agreements, founders’ agreements and partnership agreements.
The purpose of ownership agreements is to solidify the deal made between the co-founders. They should cover topics such as ownership percentages, salaries, capital contributions and what happens to the business if the co-owners part ways.
Most businesses only use agreements for their employees, not for their independent contractors. However, an independent contractor may have access to your network, databases, website or financial information. Thus, having a formal agreement is essential to protect you by outlining the job to be performed, a confidentiality agreement to prevent disclosure of your proprietary information and non-solicitation provisions. You should also confirm with legal counsel that you are not treating your independent contractors like employees, because there can be stiff penalties for improper classification.
Depending on your industry, you may depend upon vendors and suppliers to meet your customer’s needs. Thus, it is important to have a carefully drafted agreement that helps ensure that your (and your customer’s) needs will be met and that protects if you they are not. You may also need a contract with your customers outlining the business relationship and providing legal protections.
There are other types of contracts that may be necessary to help ensure the success of your business, but the above contracts provide a good place to start. If you have questions regarding the agreements discussed above or you would like to learn more about the legal services we provide, call us to schedule a free consultation.