If you’re starting a business in this difficult economy, chances are you spy a serious goal on the horizon. There’s a good chance that you are motivated, driven, and a little bit of a perfectionist. (Don’t look at me like that, you know it’s true.) You’re not alone in feeling this way. For any young, passionate entrepreneur, the new business is just like a baby, and you are a new parent hoping to do absolutely everything right. This includes getting top-notch supplies, outfitting your space just right, and drawing up top-of-the-line legal business documents.
For this last task, you may be tempted to hire a business lawyer to dot every i and cross every t. While there are some unavoidable complicated documents for which you’ll need professional support, I advise you not to overuse this resource. Business lawyers tend to be expensive, and most have no scruples about overcharging new entrepreneurs. This article is intended to help you get off on the right foot and save money right from the start.
Here are five legal business documents for which you need no lawyer.
# 1. Business Licenses & Permits
Licenses and permits, in a nutshell, make it legal for your business to run. I won’t go into much detail here, as requirements vary greatly among business types, and also from location to location. For example, if you’re opening an Italian restaurant in Massachusetts, you’ll need at minimum a Food Service Establishment Permit and a Liquor License. A shoe store in Nevada, on the other hand, will require neither of these things – that is unless you’re looking to paradigm-shift and ply your clientele with escargot and Chianti, but then you’re no longer strictly a shoe store…well, you get the idea.
Why don’t I need a lawyer?
Applying for licenses and permits is a simple task. The Small Business Association provides a useful tool for determining your obligations. It also has a complete set of links to state and federal paperwork.
# 2. Confidentiality Agreement
Also known as a Non-disclosure Agreement, this is one of the most important documents for a business to have in place. It protects all your company’s private information, whether it’s secret recipes, business plans, client leads or all of the above. This agreement is particularly important for start-ups, especially those working in or with cutting-edge technology. This is because you will often be working cheek to jowl with other, more experienced companies to develop products, court suppliers, or draw up marketing strategies.
The confidentiality agreement is actually a pretty simple document. The standard components are as follows:
1. Identities of both involved parties
2. Definitions of any “ambiguous” terms used in the agreement. These include phrases such as “protected technology” or “proprietary information” – basically any term that could be considered vague.
3. Exceptions to the agreement, in other words, any information that is not protected by the agreement, such as:
- Information that is already public
- Information that the receiving party already knows (not much of a secret anymore, is it?)
- Company information received lawfully from a third party (not really confidential)
- Information shared with third parties on a non-confidential basis (see above)
- Information that matches information developed non-confidentially by a third party
Basically, you can only use a confidentiality agreement if the information covered is actually confidential. However, you can be sure that any TRULY confidential information will be in need of contractual protection. They don’t call big business a shark tank for nothing!
Everyone with whom you share private information needs to sign your confidentiality agreement. This includes investors, employees, vendors, clients and co-developers.
Why don’t I need a lawyer?
The contents of your confidentiality agreement will depend largely on what your company does, with whom you work, and what you need to keep private. However, it’s not a hugely complex document. The main thing is to have all the components in place and be sure your information is complete. These things are within your power, not a lawyer’s. That said, since this is such an important part of your company’s foundation, winging it is not always the best plan.
Fortunately, the internet has a wealth of helpful resources for new entrepreneurs. You can find numerous articles and “step-by-steps” on the subject of confidentiality agreements, but the most helpful resource of all is templates. A template gives you an idea not only of what components to include in your document, but the order in which to include them. Take a look at a template of a standard confidentiality agreement.
# 3. Client contract
This document is vital to the success and legal security of your business. It outlines the fundamentals of your client-provider relationship. Generally, it consists of the following components:
- Responsibilities of each party
- Terms of working relationship
- Duration of contract
- Intellectual property rights
- Disclaimers & liability limitations
- Confidentiality agreement
- Conditions of termination
- Full names and signatures of all involved parties
Why don’t I need a lawyer?
The Client Contract requires little to no legalese to be legally binding. In fact, a client contract is legally binding as long as:
- Both parties agree demonstrably on the arrangement.
- Items of value—be they money, goods, services, or a combination—are being exchanged.
As with the NDA, these contracts can easily be built up from a trustworthy template. Between the simplicity of the contract and the wealth of resources on hand, you’ll have no need for a lawyer.
# 4. Vendor Agreement
Much like the Client Contract, this is a simple document that is also one of the backbones of your business. It exists to protect your interests as well as those of your suppliers and vendors. You’ll need vendor agreements regardless of what business you’re in, be you a social media mogul or the owner of a cafe, a bodega or an independent stationery store.
The major elements of a Vendor Agreement are as follows:
- Details of services or products provided
- Cost details
- Dates of service or delivery
- Provisions for mishap, breach of agreement or extenuating circumstances.
- Conditions of termination.
- Names and signatures of all involved parties.
Why don’t I need a lawyer?
This agreement is every bit as simple as a Client Contract. Little to no legalese is required. Save your lawyer-dollars for the intricate stuff and use a template!
# 5. Buy-Sell Agreement
Typically, any business with more than one owner should have a Buy-Sell Agreement in place. A Buy-Sell Agreement (BSA) dictates the fate of one owner’s shares of the company in the event that that owner departs the business. This departure can take any form, whether it’s as drastic as death or disease or as simple as retirement. Let’s say your co-owner dies unexpectedly in a freak accident. This loss can be traumatic on two levels. One on hand, you’ve lost a friend. On another, you’ve lost the order that has until now kept your business intact. You might think that the logical next step is to buy out your ex-co-owner’s share of the business and keep calm and carry on. However, it’s not always that simple.
In the case of an owner’s death or illness, the orphaned share of the business falls into the hands of his or her family. And family members, often having a tough time themselves, may be in no mood to sell. This can spell the death of a company. That is why you want a legally binding agreement to protect the company’s interests.
The details of your BSA are for you and your co-owners to decide. However, here are a few common points:
- Will this BSA apply only to current owners, or exist throughout the life of the business?
- Will buying/selling be mandatory for both parties? Optional for both parties? Mandatory for one and optional for another? Will either party have an option to refuse?
- Details and governing factors of the buy-out price
- Definition of exactly which of the ex-owner’s assets the BSA will deal with – strictly business assets? Other assets, such as loans?
- Details of the funding of the buy-out. Where will the money come from?
- How will the BSA be secured from a legal standpoint?
Why don’t I need a lawyer?
The BSA is a multi-faceted document, and one for which it may be tempting to call in legal help. However, it’s not as complicated as it seems.
One of the scariest parts of creating legal documents is the fear of content gaps or phrasing mistakes. You can avoid these issues, however, by breaking the document down into components. Discuss each section of your BSA at length with your co-owners, and be sure you agree unanimously and in writing on all phrasing and content. Think of it this way – who exactly is this document going to affect? That’s right – YOU.
Negotiating with colleagues can be uncomfortable, but it presents a great opportunity to hone your people skills and become closer as a team. Plus, with the numerous professional-grade templates available online, on formswift.com and elsewhere, you’ll find you have plenty of helpful references to choose from.
So, there you have it. Turn the lights back on; your bank account it will live to see another day. You don’t need to bring in a business lawyer for everything. In fact, I’d go so far as to say that not doing so signifies a true entrepreneur. Go ahead – use your smarts, learn new skills, and don’t be afraid to take matters into your own hands.
Images: ”A State Legal Document envelope, with shallow depth of field /Shutterstock.com“
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