[Free Non-Disclosure Agreement link at bottom!]
As an entrepreneur, in exchange for increasing your assets, you are also increasing your liabilities. It's your attorney's job to manage and minimize your exposure to liability. One of the most common and effective ways to do so is by contracts.
Although your business will likely be a party to many contracts over its lifetime, there are 5 contracts in particular that you should have (or will likely encounter) as a new entrepreneur.
1. Operating Agreement
A huge mistake that many business owners make, especially if they are in business with family or friends, is neglecting to execute an operating agreement for their limited liability company. An operating agreement is an agreement between the members of the LLC regarding the affairs, conduct, management, and operating procedure of the company. It provides a guideline for how the business will be run and how important decisions will be made.
Operating your business without executing an operating agreement with your business partner(s) is a risk that every business owner should not take. Without one, your state’s default rules will apply, which may not reflect the intentions or desires of the LLC’s members.
In addition, if you are seeking to get funding for your business from investors, it will be very hard to do so without having an operating agreement. Most investors want to review the operating agreement before they invest in a company, because the operating agreement gives them a better idea of their level of risk with the investment.
2. Client/Customer Agreement
Having contracts for your business transactions is crucial; particularly contracts with your clients/customers. It is so important that the terms of your agreements are put in writing, not only because it is a legal document that will be your evidence in court if anything goes wrong, but also because it clearly sets the expectations of both parties.
Contracts with clients should state all of the “material” (legal jargon for important) terms of your agreement, which include, but are not limited to, the description the product or service, cost of product or service, payment terms, dispute resolution, and refund policy.
Client contracts help to reduce miscommunication about what was expected or agreed to, and therefore, lead to a better working relationship. In the event of a dispute, going back to the contract is often a quick and easy way towards a resolution.
A proper contract can keep you out of expensive litigation with clients, shield against unwarranted refunds, and entitle you to payment for your product or service. The great thing is, with client contracts, you can have one template that you use for all (or most) of your clients.
Bonus* - Terms and Conditions
If you have a website for your business, you should also have terms and conditions. The terms and conditions acts as a contract between you and all of your site visitors. The terms can vary depending on the type of business you have, but the essence is that the terms protect your company from potential legal action by visitors to your website and puts visitors on notice that you (or your business) own all of the content on the site. This helps protect against copyright infringement and sets the rules on how your site is to be used.
4. Copyright Assignment Agreement
While it is true that copyright is mostly used to protect works of artists and authors, it is actually quite relevant for almost every business owner, regardless of your type of business. Most businesses have a logo that was created by someone other than the business owner. According to copyright law, the person that creates the art (in this case the logo), owns it – regardless if the business owner paid for it, unless there is a contract that says otherwise.
Copyright protection exists from the moment that the work is created. The copyright in the work immediately becomes the property of the author/designer who created it. Therefore, it is important for business owners to have a copyright assignment agreement to assign (transfer) the rights and ownership in the logo from the designer to the business owner.
The copyright assignment agreement will allow you to register the copyright in the logo in your name (or better yet, in your business’s name), and will give you all rights as the owner of the full copyright. Along with protecting the rights in your logo, copyright also protects other intellectual property for your business, such as manuals, your website layout and wording, marketing materials, written and audio visual advertisements, handbooks, and more.
5. Non-Disclosure Agreement
Protecting your business idea can be quite a task. For most business owners, your business idea is not eligible for patent protection so it’s important to have another way to keep your idea safe while you take steps to make it come to life. A non-disclosure agreement is a great way to achieve that. A non-disclosure agreement, also known as an NDA or a confidentiality agreement, is a legally-binding contract in which one or more parties agree not to disclose to third parties any confidential information that they have shared with each other as a necessary part of doing business. More than likely, you will have to share your business ideas with others for it to grow from the idea phase to revenue-generating. Having each party involved sign a non-disclosure agreement can give you peace of mind during that process.
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