By: Shriom Arza
When operating a business, there are various elements that an owner must consider to ensure its success. From ensuring that everything runs smoothly at the start to maintaining consistency as the business grows, there is one thing that a business owner must keep in check: their legal documentation, i.e. contracts. While a business owner can manage many issues on their own, this one should be left to a lawyer. Although you can try to draft your contacts by yourself, it is not suggested, as only an attorney will be aware of the many laws that come into play, as well as have experience with the possible legal issues that often arise while running a business.
The worry is that when most owners design contracts, they are thinking in terms of what they need now and a vision of where they want to end up or what they want, and are not considering all of the other possible outcomes if they omit or include critical facts. As a result, you may be able to construct your contract without including many of the features necessary to safeguard the firm and its owner. This is where an attorney comes in, since you should always have an attorney on hand to clarify certain points you should consider. Because there are so many different contracts for different scenarios, you may not always choose the appropriate contract with the most acceptable legal conditions to protect you and your business. An attorney can listen to your requirements, draft a contract to satisfy those objectives, and confirm that the proposed contract is the best option for you. If you purchase one off the internet based on your lack of knowledge of business or corporate law, you may overlook some of the most critical provisions necessary to protect yourself in the event of future complications. While you may be aware that entering into a contract with another person or business requires one, this does not mean you completely understand what you are agreeing to or what your contract must contain. Not only will a business attorney draft the contract, but he or she will also ensure that you fully understand what you are signing and what it implies for your firm. They can also provide advice and explanations about contractual issues and controversies.
A lawyer will be familiar with the types of issues and possible scenarios that may develop and will ensure that individuals express their expectations and that those expectations are documented so that you can refer back to those initial agreements if one of those scenarios or situations occurs. If you’re drafting an agreement, the likelihood is that you’ll want to enforce it at some point, and you’ll want to ensure that you have an enforceable agreement. Contact a lawyer to ensure that this is possible. Find a trusted legal advisor who can tell you what to expect, the outcomes of their guidance, and then offers you a deliverable contract that you can negotiate, that outlines expectations, and that explains what will happen if something goes wrong. One of the primary reasons for a business to establish a contract is to protect itself. When you hire a lawyer to draft your contracts, you’re relying on them to identify and correct any potential defects that could hold you liable or expose you in the event of a future dispute. Experienced attorneys understand how to structure these legal documents in order to prevent as many loopholes as possible.
When a lawyer drafts a contract for your business, the following clauses must be included:
Identification of the Parties: The parties to the agreement should be clearly identified first and foremost. The contract must include the names of individuals and businesses, as well as their contact information. There should never be any doubt regarding who is contractually obligated.
Governing Law: The parties should clarify the contract’s controlling legislation, as it will control what court will handle any litigation that arises out of that contract.
Non-Solicitation and Confidentiality: critical while transmitting sensitive information, such as customer lists or unique aspects of your business. Additional restrictive characteristics, such as a non-solicitation clause, may be worthwhile to explore. These are crucial when a company’s employee has access to important proprietary information, specifically client information. These clauses can prevent a current or former employee from taking this crucial business information to competitors. A non-solicitation clause will also prevent former employees from trying to steal clients that a company has gained through its good work and dedication.
Termination Clause: A termination clause will dictate when and how a contract/business arrangement can or will be effectively cancelled. Having a strong termination clause catered to your business’ needs can help you avoid being stuck dealing with, and provide some remedies for you against, a bad business partner, employee, customer or subcontractor.
Dispute Resolution: Before any problems arise, a contract should establish a mechanism for addressing contract disputes. This can include requiring an issue be dealt with through arbitration or mediation prior to a law suit being filed, potentially preventing aggrieved parties from filing frivolous law suits against the company.
Partnership/Operating/Shareholder agreements: Many businesses are co-owned by multiple individuals. The names of these agreements are different depending on the corporate structure of the business (whether it is an LLC, corporation or business partnership), but they all essentially serve the same purpose. These agreements dictate what powers and responsibilities each owner/partner has in regards to the running of the company, how profits and debts are shared, what happens in the event of bankruptcy, what happens in the event of the death of an owner/partner, and numerous other aspects of the business. Many of these co-owned businesses are owned by individuals in the same family, so they feel an agreement like this is unnecessary, but this may be further from the truth. Running a business involves a lot of complications, and this can cause a lot of tension and turmoil between family members, which could be greatly reduced when an operating/partnership/shareholder agreement makes it abundantly clear how issues are to be handled.
Employee contracts are one sort of contract that a firm will require. Non-compete, non-disclosure, and confidentiality agreements are the three most common types.
Non-compete agreement: Many firms require new employees to sign this sort of contract, which stipulates that the employee will not establish a competing business or work for a competitor for a certain period of time following the termination of the employment relationship. The geographic area and time this can cover is generally based on what is reasonable considering the nature of the business and where it conducts itself.
Non-disclosure agreement: contract in which the parties agree on how they will treat each other’s sensitive information and prevent them from disclosing said information from 3rd parties.
A confidentiality agreement: a legally binding contract in which one or more parties agree to keep private or classified information secret.
If you own your own business, you have probably poured countless hours and resources into making it a success, and have done everything possible to make sure everything is just right. If you draft your own contracts or using one purchased online, you are leaving a lot of very important aspects of your business to chance. If you want to protect your business as much as possible, it is advised to consult an attorney to make sure that you and your business are protected as much as possible. If you would like to schedule an appointment with an experienced attorney to do so, please contact the Law Office of Gian-Franco Melendez, LLC.
