The Four Types of Contracts Every Small Business Owner Should Have

There are many responsibilities that new and established small business owners have to juggle, but often times, seeking legal advice doesn’t end up high on the priority list. Every small business owner, at any stage of business, should understand the importance of having good contracts in place.

There are four types of legal contracts that are essential for almost every business owner, including service contracts, subcontractor contracts, employee contracts, and vendor contracts. Without them, the risk to your business skyrockets during a legal dispute, which will cost you more time and money in the long run.

Service Contracts

Service contracts are agreements between your company and a customer or client who is hiring you to perform a service. This legal agreement details the nature of the job, a potential timeline, payment terms, what services are not included, and other important details both parties need to agree to throughout your working relationship.

Subcontractor Contracts

Many small businesses rely on subcontractors to help support their workload, but without a legal agreement in place, you could be setting yourself up for costly problems in the long run. These contracts are designed to establish your working relationship, what services the contractor will provide, how long he/she will have to complete the project, and how much you will pay. This type of contract should allow for both parties to explain, in detail, their expectations.

Employee Contracts

Employee contracts are similar to subcontractor agreements in that your small business enters into a contractual relationship with someone who is working for you. This contract should outline the type of employment offer. Is this a full time, part time, or temporary position? The employee’s salary, benefits, and general responsibilities must also be clearly defined.  You may also want to consider including a confidentiality clause, which prevents an employee from revealing any sensitive information about your company and an anti-solicitation clause so that the employee doesn’t solicit your clients when he/she leaves your company.. An employee handbook and company policies should also be provided along with the contract.

Vendor Contracts

Any company or vendor that sells products or services to your business is considered a vendor. Usually, vendors provide their contracts, but many business owners don’t take the time to read through their vendors’ contracts thoroughly. What product or service are they providing? Are there early termination fees? What are the payment terms? Are there interest rates? Understanding your vendors’ terms, negotiating them, so they are favorable to you, and including your words are not to be overlooked before signing on the dotted line.

Seeking out legal advice and representation can seem like a daunting and expensive task, especially when you are running a growing business, but the time and money it can save you if you do run into a legal dispute is well worth the investment. Your business is your most important asset and you should have properly drafted agreements to ensure that you are protecting it in the best way possible.

Ser & Associates attorneys are well-experienced in drafting and negotiating business contracts. Call us for a free consultation at 305-222-7282.