Essential Legal Agreements for your Small Business

3.4 min read1012 words

When starting a small business there are many considerations and decisions to make about your business, least of all the legal contracts or documents you need as well. Depending on your business you are starting, you may start with a sole proprietorship structure or have already visited a lawyer and incorporated your business.  Regardless of your business structure there are some standard legal contracts and policies that are important and required for your business.  In this article I will discuss those documents.

Terms of Service / Privacy Policy – these pages are likely never read, however they are definitely required, particularly if you are gathering user’s personal data or running an e-commerce business.  These policies can limit your liability and protect your rights.  This policy is particularly important for protecting your interests where the use of user data is subject to different international laws such as CASL and GDPR. You also want to include a notice about copyright. e.g. “Copyright © 2021.”

Service Contracts – If you are a graphic designer freelancing, you would want to ensure you have protected your intellectual property you have created and if you are handing over those rights to the business you are providing the service to.  A service agreement would need to include what rights you are granting or licensing to them and what rights they have with that body of work.  To protect your interests you want to research the company you will be working with, ask for a non disclosure agreement and use a watermark on your images. You want to make sure you know your rights when it comes to intellectual property – you can find more information and book a meeting with the Canadian Intellectual Property Office to have those questions answered.

In addition you also need to include:

  • Defining your responsibilities and expectations of the client and how to deal with issues that may arise
  • Your fees, if you will charge late fees, forms of payment and any ancillary costs (software, digital images)
  • The start and end date of the contract and important project dates & milestones
  • Length of any confidentiality or NDA terms
  • If the contract extends, changes or renews
  • When, how and at what intervals you will provide invoices to the client.
  • If you can use the work you created in a portfolio and how the customer can use it

Independent Contractor Agreements – your first hire may more than likely be a sub contractor or independent contractor and you will want to protect yourself from unforeseen roadblocks, obligations or if there is any intellectual property rights that you need to keep.  These agreements define the business relationship between yourself and the contractor you hire. It details the scope of work to be undertaken, the fees and service details, the tax liabilities as well as who is responsible for different aspects of the work to be undertaken.

Employment Agreements – If you are going to be hiring an employee you need an employment agreement and it is worth the investment!  These agreements can protect you from legal obligations such as severance and termination situations.  This contract forms an agreement between the employee and your company and outlines the obligations of both parties and sets clear expectations about the job, the compensation package, what the conditions of employment are and makes sure you are both on the same page.

Confidentiality / NDA Agreements –  these agreements are essential if you are sharing any trade secrets or data about your business with potential investors or suppliers. Without this agreement there is no obligation for confidentiality and leaves you and your business legally vulnerable and exposed.

Partnership Agreements – if you are entering into a business partnership, get a partnership agreement. This can help outline the responsibilities of the partners, the percentage of ownership, how you divide revenues and losses as well as deal with resolving any conflicts should they arise.

Top Tips for Good Legal Agreements

Above all keep it simple!

  1. There should always be dates as well as details on the length of the term in the agreement and contracts should always have an offer and acceptance
  2. If it’s renewing what are the provisions
  3. Transparent pricing and payment procedures
  4. Who owns the intellectual property and if there is licensing to transfer the rights
  5. How to resolve any disputes and termination clause
  6. Date, signature and witness

The Business Advisory Centre Durham has an affiliate partnership with Law Depot whereby you receive a 15% discount on the membership for the legal agreements you may need. If you need more substantial agreements, we would suggest you connect with a lawyer for further guidance through our referral network.

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