You know that your small business needs some contracts but which ones?  Are some more important than others?  Do you really need any?  The answer to both questions is “Yes”.  So, to make it easier for new small business owners, we have compiled a list of 4 essential contracts for small businesses.

We know that starting a new business can feel overwhelming.  For a variety of reasons – such as cost, lack of awareness, or lack of time – owners often overlook contracts until after a problem arises.   Unfortunately, contracts are not one of those items you want to put off until an issue arises.  So, start with these four essential contracts and then call Concerto Law to see what else you need.

Commercial Lease

You probably spent weeks or months scouting out the perfect location for your enterprise.  When you finally found the perfect spot, you were overjoyed!  Then came the not-so-fun part; negotiating your commercial lease.

You need a commercial lease if you rent the space your business occupies.  Here are some very important items to pay attention to:

  • How many years is the lease?
  • When and how you can terminate the lease? What about the landlord?
  • Who is responsible for repairs?
  • What utilities are you responsible for?  What utilities does the landlord provide?
  • Can you sublet the space?
  • Are there any local zoning, parking, or signage restrictions that will negatively affect your business?

Do not simply agree to the lease the Landlord provides without carefully reading it.  You should have an attorney review the lease if the rent is a substantial proportion of your operating expenses or for a duration of longer than one year.

Operating Agreement

Many first-time entrepreneurs do not bother with making a contract that spells out the nature of their businesses.  This can be a recipe for disaster later, especially if you have business partners.  A solid operating agreement for your corporation, LLC, or partnership will spell out important information that is necessary to smoothly operate your business.

For more detailed information, including the importance of this type of agreement, read this article:  6 Essential Clauses  Your LLC Agreement Needs.

Website Terms of Use and Privacy Policies

A well-maintained website is an important part of a successful business strategy.  Many companies (especially during these uncertain times) are focused on e-commerce.  Websites in general, but especially e-commerce sites, must comply with several state and national laws.

If you plan on allowing customers to purchase goods from your website, you need an agreement that lets users know what you are allowed to do with their private information.  Similarly, if users can register for an account on your site or post information to your site, you need to inform the users of how you collect and use their information.   For more detailed information, read this post: Does My Website Need A Privacy Policy?.

Employee and Independent Contractor Agreements.

Employees.  Even though most employees are at-will employees (meaning you can fire them for any lawful reason), you should create an agreement with the employee through a one-page offer letter.

Prepare an offer that identifies the essential terms of employment.  These are: job title, duties, starting date, rate of pay, and the days and hours the employee will work.  In addition, clearly state that the employment is “at-will”.  This means that you can terminate the employee for any lawful reason.  Ensure that you and the employee sign the offer letter.

Independent Contractors.  Many small businesses often begin with independent contractors, such as for outsourcing specialized tasks (i.e. IT services, web design, marketing).  Any business using independent contractors needs a written agreement identifying the specific duties of the contractor, the length of time the contractor will perform the services, a notice that the contractor will be responsible for reporting the income as self-employment or business income and not as wages.

Employee versus independent contractor determinations are tricky.  You should consult an attorney knowledgable in this area before deciding an individual is an independent contractor.  For more information on this topic, see my post here: Independent Contractor or Employee?

Conclusion

These are just four essential contracts for small businesses.  This is not an exhaustive list of the contracts you need for your company.  Depending on your type of business, there are many more contracts that you need to protect you and your business.

For comprehensive business law guidance from an experienced, friendly, and non-intimidating attorney, contact Concerto Law at (814) 706-1288.