Starting your own business can be overwhelming, especially dealing with all of the legal paperwork and formalities that come along with it. Many entrepreneurs become overwhelmed and just push this to the side, but it’s important to cross your Ts and dot your Is or you’ll be setting yourself up for some major legal issues in the future.
There are a few legal documents that are more likely to cause problems, if you don’t have them, than others, so every entrepreneur should be sure to get them in place before moving forward with building the business. I’m not a lawyer, so you should consult a qualified attorney about all of your legal questions, but 3 legal documents that every single entrepreneur absolutely must have to keep his or her bases covered are an ownership agreement, worker agreements, and customer and vendor or supplier agreements.
The ownership agreement may take a number of different forms such as a shareholders agreement or partnership agreement depending on your business, but you must have one if there is more than one person with any ownership rights. You have to make it crystal clear, in writing, who owns what, who controls what, who needs to sign off on what, who has contributed what, who will be paid what, etc. before you get up and going. This is basically the business equivalent of pre-nup and, just like with a nasty divorce, if you end up in conflict with a co-founder or other co-owner and this agreement is not in place, you will waste an immense amount of time, money, and energy working things out after the fact.
Worker agreements – whether with contractors or employees – must clearly specify the duties and responsibilities, timelines, payments, and any other details related to your relationship with the people that work for you. Make sure you’re in compliance with all labor laws and that you’re properly identifying employees as employees and contractors as contractors…if you need help distinguishing between the two you can check out my earlier post here.
Customer and vendor or supplier agreements lay out all of the terms and conditions for the relationship between you and any organization that you purchase from or anyone who purchases from you. Depending on your business the customer agreement may be a standardized terms of service type agreement or it may be an actual contract signed by each new customer. Vendor or supplier agreements are likely formal and should include protections for you if the vendor fails to deliver or if there is any issue with the product. In any of these cases, exactly what the buyer gets, when the buyer gets it, how much it costs, what the payment terms are, what happens if something goes wrong, and any necessary protections should be included as well as any other items specific to your business. If you’re not sure what’s needed, speak with a lawyer who is experienced with that type of agreement in your industry.
Putting the work in to get these 3 legal agreements in place upfront will turn out to be invaluable protection for your budding business later on, so don’t sleep on any of them. The small extra time and money commitment will surely save you major stress later on.
Now I want to hear from you. Do you have experience with one of these agreements saving you in a sticky situation or a lack of one of these agreements biting you in the butt. What other legal agreements do you think are absolutely necessary for all entrepreneurs to have? Let me know in the comments below.
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