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Contracts for Business Startups

Contracts for Business Startups

Knowing Contract Types and the Fine Print

Starting your own business can be an exciting opportunity to do what you love, be your own boss, and make money. The whole affair can feel intoxicating. But the less glamorous side of entrepreneurship involves getting your legal affairs in order. And contracts are one of the most important tasks to tackle.

No matter the type of company, product, or service, contracts are essential for safeguarding your time and money. Even with so much on your mind as a small business owner, it’s important not to skip this crucial step to avoid potential trouble down the road.

So let’s break down the basic categories of business contracts and terms every startup should know.

Types of Business Contracts

A contract is a written or verbal agreement that can be upheld by a court of law. While handshake deals may seem like the easy and friendly way to go, especially for a startup, verbal agreements are not always clear and can lead to serious conflict, even between well-meaning parties. To keep your business safe, put in place, and only commit to precisely-written documents you understand.

1. General Business Contracts

Structuring your startup well from the beginning will make sure you legally cover all your bases and prevent future issues. Whether you have a co-owner, shareholder, leasing agent, or other business connections, every relationship to your company needs a straightforward and understandable written contract in place. Some common examples are:

  • Partnership agreement
  • Property or equipment lease
  • Franchise agreement
  • Indemnity agreement
  • Stock purchase agreement
  • Liability release

Many of these contracts are straightforward, but they are mission-critical for businesses that need them. A knowledgeable attorney can help you figure out which ones you need.

2. Employment Contracts

With so much at stake, hiring someone to work for your business is usually a weighty decision. Everyone you hire, including friends and family, should have a clear-cut document spelling out exactly what you expect from them and what they should expect from you. This keeps all parties on the same page should any questions or issues arise. Basic employment contracts include:

  • Salary or wages
  • Work schedule
  • Benefits
  • Length of employment (if temporary)
  • General duties and responsibilities
  • Grounds for termination

For specific industries requiring confidentiality, like designs, patents, or pharmaceuticals, you may consider a non-disclosure agreement to prevent leaking of vital information to a competitor. Other startups, like medical practices or co-owners of a business, will add a non-compete agreement, which puts limitations on where and with whom employees can work after they leave the company.

3. Sales-Related Contracts

Most startups need help from other professionals to get a new business up and running. Whether you hire an accountant, web designer, photographer, or other company providing a service or product, a solid contract prevents either party from being confused or misled. Examples include:

  • Purchase order
  • Warranty
  • Bill of sale
  • Licenses
  • Advertising agency agreement
  • Security agreement
  • Services agreement
  • Manufacturing or supply agreement

What are the Terms?

Embedded into every contract are terms or specific conditions required for that particular agreement. In other words, the fine print. It might be tempting to gloss over the “legalese,” but before signing any contract, everyone involved must understand their respective obligations and responsibilities.

The sky’s the limit when it comes to the quantity and type of terms out there, but in general, be on the lookout for:

  • Payment or reimbursement
  • Description of services to be performed
  • Warranties
  • Limits of liability
  • Indemnity clauses
  • Insurance
  • Confidentiality
  • Subcontracting
  • Intellectual property creation


Don’t get caught with a handshake deal gone wrong or a misguided contract. Whether you need help writing a precise contract or going through the fine print on an existing document, the lawyers at BB&C know the ins and outs of protecting your business. Contact Cecelia Neihouser Harper at 765-637-9175 to learn more.

The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.

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