Running a business without the required legal documents is a recipe for disaster. Use these legal templates for small business owners.
Legal documents are essential for a company’s management, as they provide the necessary information to properly run and deal with various transactions with external parties. They’re also your most important tools for protecting your business against lawsuits and complaints.
Whether you’re an up-and-coming small business owner or an experienced one with multiple companies under your belt, these are some of the most important legal templates you need to run your business.
What Legal Documents do You Need to Start a Business?
4 Legal Templates You Need to Run Your Business
1. Owners Agreement
a. LLC Operating Agreement
An LLC Operating Agreement is a legal document that companies, specifically limited liability companies (LLCs), use to dictate the business’ governing structure in terms of financial and functional decision-making.
Though it isn’t mandatory in most states, an operating agreement is nonetheless crucial to a developing company.
This agreement allows owners to govern the internal operations per their own rules and specifications. Without this document, the business will run according to the default management rules of the state the business resides in.
OR, if you’re in a partnership and not an LLC (btw, not a good idea)
b. Partnership Agreement
If a business is owned by two or more people, a Partnership Agreement is a must.
As the name suggests, this agreement dictates the management structure of a business between two or more business partners when there is no LLC (this makes you liabile personally for everything – and everything your partner does – so don’t do it). But if you are in one, then your agreement should address the following: Capital contributions; Decision-making responsibilities; Ownership percentage; Partnership property; Partnership length; Authority; Withdrawal or death, in the case of untimely loss; and Dispute resolution
Again, we highly recommend avoiding a partnership and using an entity like an LLC.This agreement provides all parties with peace of mind knowing that everyone is on the same page and has the same expectation of how the business is meant to operate.
2. Service Agreement for Clients
A Client Service Agreement, also known as General Service Agreement or simply Service Contract, is a legal contract that dictates the relationship between the company and the client. This agreement is commonly used by service providers, such as:
- Software companies
- Graphic designers and illustrators
- Event Planners
- Real estate brokers
- Photographers and videographers
This agreement provides the legal framework of the service provided between the parties in a fair and uniform way. It’s also meant to provide a starting point for negotiations, which reduces the time it takes to reach a service agreement.
This document establishes trust and security between the client and the business owner. It also allows business owners to safely and legally accept payments online.
4. Hired Help
a. Employment Agreement and/or Independent Contractor
Like many smart legal documents on this list, an Employment Agreement isn’t mandatory but is still extremely important.
Any business that hires employees should have an Employment Agreement. Without this contract, the terms of employment are subject to misunderstanding and miscommunication, which can lead to resignation and, in worse case scenarios, lawsuits.
An employee agreement addresses some of the more important aspects of working with the business, including:
- Duties and responsibilities
- Working hours
- Work benefits
- Wages and overtime compensation
- Termination and notice period
An employee agreement sets solid work boundaries between employee and employer, as well as a sense of security and stability for both parties.
b. Employee Handbook
A well-written employee handbook is a valuable communication resource that protects both the employee and employer. You often see this with larger companies with many employees but it’s a great resources for any business looking to grow. It makes the owners be thoughtful about policies that can streamline their processes and policies with employees.
An Employee Handbook lists everything an employee needs to know about the company’s history, values, mission, benefits, procedures, and policies in an easy-to-understand format. It lays out the do’s and don’ts of the company to avoid civil fees and penalties.
An employee handbook covers multiple topics, but some of the most important are as follows:
- Code of conduct
- Work benefits and leaves
- Work schedules
- Harassment and anti-discrimination policies
- Equal employment opportunities
- Safety and security
An employee handbook avoids misunderstandings and conflicts between employees that can potentially lead to damages and lawsuits. Every company must have an updated handbook that an employee must sign when entering a contract.
5. Other Legal Templates for Small Businesses
a. Nondisclosure Agreement (NDA)
Nondisclosure Agreements (NDAs) are legally binding documents that prevent sensitive and confidential information from being made available to the public.
Businesses use these documents to protect confidentiality in disclosure to potential clients, suppliers, creditors, and investors. This way, all parties will be allowed to share sensitive information with each other without worrying that it’ll end up in the wrong hands.
An NDA must be signed before business discussions take place to protect the interests and details of a potential deal or partnership. If broken, the violator will be required to pay hefty financial damages and any other damages stemming from the breach of contract.
b. Affiliate Agreement
Almost every successful business benefits from affiliate programs, but these partnerships can’t legally exist without an Affiliate Agreement.
For the uninitiated, an Affiliate Agreement is an agreement between an advertiser and an affiliate that oversees and defines the responsibility of each party.
The agreement sets expectations like timelines and payment thresholds to protect you and your business from third-party affiliates. By signing this agreement, the affiliate understands and acknowledges the company’s policies and complies with federal and state anti-spam laws.
Legal documents build a foundation with any business. They set the tone of expectations and professionalism with everyone involved. They also avoid the pitfalls found in the world of he said/she said that can be ongoing distractions to a business and its culture.
If you’ve yet to get a hold of these documents, we can help you with any legal template you need for a successful business without the expensive costs that come with hiring a lawyer. From operating agreements to industry-specific templates, we’ve got you covered!
If you need anything else, contact the business lawyers behind Drafted Legal.