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6 Contracts Every Business Should Use
Superior Skill, Superior Work Ethic, Superior Results
Every business needs different contracts depending on how they operate and what they do.
Yet in general, most businesses will need to use the six contracts below.
Shareholder’s or Partnership Agreements
What they are:
An agreement covering how the company is governed.
Why you need one:
If you and your partner end up in a dispute this agreement will determine what happens next. If your partner dies or can’t meet their obligations or wants to sell their share of the company this agreement will help you navigate that trouble. These agreements also protect your company in the event that you or your partner wind up getting a divorce.
When you have shareholders, these agreements help to determine what will happen in the event of a major dispute over the future of the business.
Employment Offer Letters
What they are:
These letters formally create the employee-employer relationship. They should include a job offer, a job description, a description of salary and benefits, and the terms and conditions of employment, usually “at will.” Employees should sign the letter and return it before they are allowed to start work.
Why you need one:
This is one of the first pieces of evidence you will use to defend yourself in a wrongful termination case, as it outlines what the employee is meant to do and what their compensation will be.
Employee Handbooks
What they are:
A formal outline of your policies and procedures. Again, employees should sign their handbooks before being allowed to return to work so that they can show that they’ve read and understood your policies.
Why you need one:
Your workers compensation insurance company may require one as they don’t have to pay claims, in most cases, arising from violations of company policy. In addition, you’ll need to have clear, documented written policies if you want to discipline an employee in any way, especially by terminating them. Usually you will have to show a clear progression of discipline in response to policy violations to show that your termination was lawful.
Independent Contractor Agreement
What it is:
An agreement outlining what the contractor does for you, what they will get paid, and when.
Why you need it:
To secure the services you’ve paid the independent contractor for, especially if you’ve paid in advance. For evidence in a potential billing dispute. To prove that you have not mis-classified an employee as an independent contractor should a dispute arise.
Service Agreements or Sales Contracts
What they are:
The terms under which you will provide service, including what you will and will not do, how much you will get paid and when, or what you do and do not warrant or guarantee. In a sales contract: the terms under which returns or exchanges will be accepted, the terms of delivery, any payment terms if you are accepting payment plans, and what you warrant or guarantee about that product, if anything.
Why you need them:
For protection in the event of a dispute. Your client doesn’t want to pay you because they say the service was substandard? You can point to the service contract and show that what they wanted was never something you provided in the first place. Your customer wants a refund? You don’t have to provide it if it goes against the terms of your sales contract.
Release of Liability Forms
What they are:
Forms which protect you from liability in the event that certain unavoidable events take place, or which acknowledge that there are risks in participating in a certain product or service.
Why you need them:
They can help provide a defense in an injury case, or a case where a client or customer is trying to charge you for damages to their property.
Boilerplate won’t do!
While most businesses may need to use these contracts there is no such thing as a one-size fits all contract that will help all businesses succeed. Every contract you have should be developed by a qualified business attorney so that it pertains solely to your business.
See also:
7 Legal Mistakes New Business Owners Make
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SCOTT B. RICHMAN, ESQ.
Managing Member & Founder
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on AvvoMr. Richman is the Managing Member and Founder of Richman Law Firm PLLC. In his role as Managing Member, Mr. Richman oversees the day-to-day operations of the firm and handles the litigation of the most complex legal matters across a vast array of practice areas and disciplines.