If you’re a small business owner and work for yourself or employ some team members to help you out, you definitely have a range of legal obligations that you should be aware of. As a business owner myself, I know full well how important it is to keep your house in order to have the right terms and conditions and agreements put in place to offer both you and your employees legal protection. In this article, we cover the five most common business contracts that you need to have.
Articles of Incorporation
First up, your company structure document or articles of incorporation
Many businesses really put themselves in unneeded risk by postponing the process of incorporating into a company. The benefits that come with incorporation include minimised risk and maximise security, easier access to capital, and boosting your business reputation
Articles of incorporation are important business documents because they establish your legal entity. Filed with the government, these documents typically signify the creation of a company or corporation. Articles of incorporation usually include the company’s name, the type of corporate structure, and the number and type of authorised shares. Having articles of incorporation can provide your company with favourable tax advantages.
Independent Contractor Agreements
If you’ve ever hired a contractor for a one-time project or engaged someone on digital gig platforms like Fiverr or Upwork without a legally binding contractor agreement in place, you’re putting yourself at danger.
All businesses that hire independent contractors should have a written, signed agreement with them.
This agreement should specify:
- scope of work
- compensation details
- ownership of intellectual property (IP) following task completion, and
- the contractor’s duties.
In addition, the agreement should specify dispute resolution procedures to safeguard both parties in the event of a disagreement. A qualified contract lawyer can provide you with the right legal advice and draft contracts that protect you and your business.
Employment Contracts
Employment contracts are essential for several reasons, providing clarity, legal protection, and mutual understanding between employers and employees. They are important as they:
- are drafted to fit the needs of your business
- Meet the local employment laws in your jurisdiction
- Result in fewer disagreements because contracts were complete and easy to understand.
- Help you to get around complicated legal issues so you can focus on growing your business.
Key items to include in your employment contracts include:
- The employee’s role, responsibilities, and expectations.
- The agreement should detail the employee’s compensation, including salary, bonuses, and benefits.
- It should also specify working hours, breaks, and remote work options.
- A probationary period is often included to evaluate performance.
- Termination clauses outline termination circumstances.
- Confidentiality and non-compete clauses protect sensitive business information and prevent employees from disclosing company secrets or working for competitors.
Sales Agreements
When selling a product or service to a customer or vendor, you must have a sales agreement in place. This agreement covers all aspects of the sale, including product or service specifications.
Without a prior agreement, you may face a number of challenges, including identifying who bears the cost of delivery delays, dealing with quality control concerns, addressing faulty products, and dealing with unmet responsibilities under a verbal agreement.
A detailed sales agreement clarifies these issues, assuring long-term connections and saving money by avoiding disagreements.
Commercial Leases
Now, if you rent an office or a commercial space to run your business, it’s a good idea to have a commercial lease in place. Commercial leases are often quite a lot more detailed than residential leases, but it’s to ensure the protection of your business. If you ever have a dispute with your landlord, you can resort back to the items in the commercial lease.
Some of the most important or contentious issues that come about commercial leases include not being aware of an option to renew or not being aware of how an option to renew can be exercised. Now, if at least contains the right to renewal, both parties need to be aware how these options can be exercised regarding dates and actions.
When it comes to repairs and maintenance on commercial property, this is often a source of many disappeared. You need to have clauses in the commercial lease agreement that sets out who is responsible for maintenance or repairs.
For example, landlords are often required to maintain the structure of the premise, while tenants are required to repair and maintain its condition.
Key Points
As a small business owner, you have various legal obligations to consider. It’s vital you maintain proper terms, conditions, and agreements for legal protection for both yourself and your employees.
From contractor agreements to employment contracts, and sales agreements to leases, there is a lot to consider, however you’ll be better off in the long run by giving yourself this protection and peace of mind.
Author: Marshall Thurlow is the Director and Founder of Orion Marketing Pty Ltd. He is a digital marketer with expertise in SEO, website design, content marketing and project management.