The Must-Have Contracts Every Entrepreneur Should Know (and Have)

Starting and running a business involves a lot of moving parts, and ensuring that these parts work smoothly requires clear agreements. While verbal agreements and handshakes may have worked in the past, modern businesses rely on written contracts to protect both parties involved. Whether you are working with employees, independent contractors, clients, or partners, having the right contracts in place can help safeguard your interests and avoid costly disputes.

Here’s a breakdown of the must-have contracts every entrepreneur should know (and have), ensuring that you start your business on solid legal ground.

1. The Business Partnership Agreement

If you’re starting a business with a partner (or multiple partners), a Business Partnership Agreement is essential. This contract outlines the roles, responsibilities, and expectations of each partner, as well as how decisions will be made, how profits will be distributed, and what happens in the event of a dispute or if one partner wants to leave the business.

Why It Matters:

Without this agreement, disputes can arise over ownership percentages, financial contributions, and responsibilities, which could ultimately harm the business. According to Entrepreneur magazine, a written partnership agreement provides clarity and helps prevent conflicts down the road.

2. The Non-Disclosure Agreement (NDA)

A Non-Disclosure Agreement (NDA) is a contract that helps protect your business's confidential information. Whether you’re sharing ideas with potential partners, investors, or employees, an NDA ensures that they don’t disclose any sensitive data to outsiders.

Why It Matters:

In a world where intellectual property and proprietary information are often a business's most valuable asset, an NDA helps maintain confidentiality. According to Forbes, NDAs are essential for protecting new business ideas and innovations from being stolen or disclosed by others.

3. The Independent Contractor Agreement

If you work with freelancers, consultants, or other independent contractors, a well-drafted Independent Contractor Agreement is crucial. This contract outlines the scope of work, payment terms, deadlines, and ownership rights regarding the work produced.

Why It Matters:

An Independent Contractor Agreement helps clarify expectations and ensures that both parties understand their obligations. This contract also helps distinguish contractors from employees, which is important for tax purposes and compliance with labor laws. According to Small Business Administration (SBA), having a formal agreement can help avoid misunderstandings and legal issues, especially with IRS misclassification concerns.

4. The Client Service Agreement

If you are offering products or services to clients, a Client Service Agreement is key to setting clear expectations. This contract outlines the scope of services, payment terms, timelines, and deliverables.

Why It Matters:

A solid client service agreement helps prevent misunderstandings and disputes. It sets boundaries regarding what services are included and ensures that both parties are on the same page. According to LegalZoom, having a clear agreement in place is essential for maintaining professional relationships with clients, especially when there are changes to the scope of work or delivery deadlines.

5. The Employment Contract

For any business that employs full-time or part-time staff, an Employment Contract is essential. This document outlines the terms and conditions of employment, including salary, benefits, job responsibilities, non-compete clauses, and termination procedures.

Why It Matters:

Employment contracts protect both the employer and the employee by establishing clear expectations for performance and behavior. According to the U.S. Department of Labor, employers should have written contracts to avoid misunderstandings about compensation, job duties, and the employee’s legal rights.

6. The Non-Compete Agreement

A Non-Compete Agreement (NCA) restricts an employee or contractor from working with competitors or starting a competing business within a certain timeframe and geographic location after leaving your company.

Why It Matters:

A Non-Compete Agreement is valuable for businesses that rely on proprietary knowledge or a competitive advantage. It protects your business’s trade secrets and prevents former employees or contractors from using insider information to compete against you. According to SHRM (Society for Human Resource Management), non-compete clauses are especially important in industries where specialized knowledge or technology gives a business a competitive edge.

7. The Terms and Conditions Agreement

If your business operates a website or online store, a Terms and Conditions Agreement (T&C) is a must. This contract sets the rules for users accessing your website, purchasing products, or using your services.

Why It Matters:

A Terms and Conditions Agreement outlines the rules governing how customers interact with your business online. It helps protect your intellectual property, limit your liability, and clarify your business's rights in case of a dispute. TechCrunch reports that businesses without clear T&C agreements risk legal issues regarding user conduct, intellectual property theft, and customer refunds.

8. The Sale of Business Agreement

If you ever decide to sell your business, a Sale of Business Agreement is necessary to legally transfer the ownership of your company. This contract outlines the terms of the sale, including the price, the assets being sold, and the responsibilities of both parties.

Why It Matters:

A well-drafted sale agreement ensures that all aspects of the sale, including asset transfer, liabilities, and post-sale conditions, are clearly defined. According to Investopedia, having this agreement in place reduces the risk of disputes after the sale and ensures that both the buyer and seller understand their responsibilities.

9. The Loan Agreement

If you’re borrowing money to finance your business, a Loan Agreement is an essential contract. This outlines the terms of the loan, including the loan amount, interest rate, repayment schedule, and any collateral.

Why It Matters:

A Loan Agreement ensures that both you and the lender are clear on the terms of the loan. Without one, disputes can arise over repayment terms, interest rates, and penalties. According to the Small Business Administration (SBA), a loan agreement offers legal protection and minimizes the risk of default.

10. The Intellectual Property (IP) Assignment Agreement

If your business involves the creation of intellectual property, an Intellectual Property Assignment Agreement is crucial. This agreement ensures that the IP created by employees or contractors during their work for the business is legally owned by the business.

Why It Matters:

This contract is vital for ensuring that any intellectual property (e.g., trademarks, patents, copyrights) developed during employment or contract work belongs to your business. Without it, creators might retain ownership of the IP they create, which can lead to ownership disputes. According to WIPO (World Intellectual Property Organization), businesses must secure IP ownership to maintain their competitive advantage.

Conclusion: Protecting Your Business with the Right Contracts

Having the right contracts in place is not just a legal safeguard; it's also a critical step in building a trustworthy, transparent, and sustainable business. Clear and well-drafted contracts lay the foundation for strong business relationships, help you manage risks, and give you peace of mind as you grow your business.

Consulting a qualified attorney to create or review these contracts is highly recommended to ensure they are legally sound and meet the specific needs of your business. By ensuring that your business is built on a solid legal foundation, you’ll have the protection you need to navigate challenges and seize opportunities with confidence.