5 Essential Legal Contracts Every Small Business Needs

Updated: Feb 4

Whether you’re building a new business or you’re a seasoned entrepreneur moving towards expansion, you either already have legal contracts or have thought of getting them for your business. Now I know that the idea of contracts is not the most exciting and it’s easy to keep putting it off. I get it, who wants to talk about the boring legal stuff when you have other exciting revenue generating activities like marketing, business development and sales to focus on. But one legal issue could set your business back thousands of dollars. You owe it to yourself and your business to ensure that you have all the important contracts in place to protect you and your business.

Here are the 5 most essential legal contracts that a small business needs:

1. Client Service Agreement or Sales Contract

If you are in a service-based business, a client service agreement is an absolute must have. It governs the relationship between you and your client. You could be a business coach, health coach, graphic designer, or an event planner. You should have a written contract that sets forth the understanding between you and your client. Let’s say you’re a business coach and you have an initial consultation with a prospective client to see if you’re both a good fit for each other. The client likes you and wants to work with you and has some follow up questions that you address over your next phone conversation. In this back and forth verbal conversation, you convey to your client what is included in the services, duration of the program, and cost of the program. But let’s be honest, do you think your client is going to remember all that information that you gave him/her on the phone? If you had a written contract that the client reviewed and signed, then there will be a record of it and your client can go back and look at the contract to refresh his/her memory. If your client calls you over the weekend, you don’t answer, the client is upset with you for that reason and wants to terminate the relationship, then you can show him/her the contract terms which will state that you don’t take calls or respond to emails over the weekend and that if a client wants to terminate the relationship before the program ends, that there will be no refunds.

If you are a product based business, then you should have a Sales Contract. Some businesses will not need a sales contract, like a small clothing store. In that case, the sales contract can be on the purchase order or invoice, which will include returns, refunds, taxes, warranties, disclaimers of warranties and liabilities, and limitation of liability.

2. Non-Disclosure Agreement

A Non-Disclosure Agreement or NDA is designed to protect your confidential information relating to your business. There may be times when you have conversations with someone that you think you’d like to work with or even a potential investor. You’ll need to share some financial information or may be an idea you’ve had that you need help developing. Having the other person sign an NDA will help protect your confidential information. Ideally, an NDA must be signed before you disclose any confidential information. Having an NDA will prevent the other person from stealing and using your information or ideas.

3. Independent Contractor Agreement

An independent contractor is a person who is not an employee. He/she is not tied exclusively to you and can undertake several projects. In your business, you may not have an in house graphic designer or photographer. But you’ll hire someone on a project basis as and when a need arises. They are independent contractors because they have their own business setup and work for different clients at the same time. When you hire an independent contractor, you should have them sign an independent contractor agreement which will set forth the scope of their services, compensation, their status as an independent contractor and not an employee, and assignment of all the work that is done for you. Ideally, the graphic designer or photographer you hire should have a client service agreement of their own. But most don’t have it or have a bare bones version of it. So it’s a good idea to have your own independent contractor agreement in your arsenal that you can use whenever you hire a freelancer.

4. Privacy Policy

Most businesses have a website or an ecommerce store that allows users to make purchases or subscribe to newsletters. If you take any personal information like names, addresses, financial information from your users, you are required to have a privacy policy on your website.

5. Website Terms and Conditions

These set rules for website users to follow. It’s a contract between you and the website user and purchasers of your goods and services. Website T&C helps in avoiding legal liability to the website owner. It will have provisions for limitation of liability, copyright and IP rights issues, disclaimers and manner of dispute resolution.

If you already have these contracts in place, be sure to conduct a periodic review of your legal contracts so they are up to date with your current business offerings. If you don’t, I highly recommend that you get in touch with a lawyer to set them up for you.

At Nupur Shah Law, we help business owners protect their creative works and their business. We help with reviewing your work and determining the best possible protection available to you. Call us at 646-820- 1366 or email us at I am happy to have a complimentary conversation with you on how to secure your rights.

Working with an attorney to secure your business can help avoid trouble later on. Nupur Shah Law can help you if you have questions about your business.

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