Contracts is arguably the broadest topic, that is why we will divide it into two blog posts. The main purpose of contracts is to protect and give certainty to relationships between people and businesses. The type and complexity of your contracts will depend on your specific type of business. In part 1 of this blog post we will lay out 5 typical contracts your startup needs.

1. Founders Agreement

If you are starting a business with one or more person, you need a founders’ agreement. Why? Well, before you even select and create an entity, your team will probably have already worked many hours developing the business. It is possible that each of you contributed, and continue to do so, to different aspects of the business. For example, you were the one with the idea, but one of your partners was the one that put the money, and the other was the one that put in the work. A founders’ agreement will help define responsibilities, the decision making process, potential ownership, and the operating procedures among your team.

2. Non-Disclosure Agreements (NDA)

Generally, entrepreneurs will want to raise capital by pitching to potential investors. In doing so, you will share your awesome business idea with a handful of people. If you don’t want the word to spread around, you should try to get people to sign a NDA before sharing with them your project. Always remember, ideas are not protectable, intellectual property is. Also, NDAs are very useful to protect trade secrets.

3. Commercial Lease

Most startups will need a commercial lease for their business. A commercial lease is a contract between you (food truck, coffee shop, retail store) and a landlord (gas station, food truck park, parking) for the rental of property. For example, if you are starting a food truck, you will probably need a commercial lease to park your truck on someone else’s premises. Other fixed businesses will also need a commercial lease, be it with a mall or a building.

4. Service Agreement

You can use a service agreement to provide a service and get paid by doing so, or to receive a service by paying your vendor. This is the type of contract consultants, lawyers, CPAs, and other professionals use. Sometimes people agree to have a general or master service agreement where they broadly define their relationship. By doing so, people will then agree upon more detailed stuff on a project or statement of work.

5. Sales and Purchase Agreement (SPA)

The SPA helps establish the terms and conditions between a buyer and a seller. Let’s say that you sell farm crops to food trucks. Through the SPA you can agree the place and time of the transaction; the price of the crops; what happens if you can’t deliver the goods; and the exclusivity, if any, of the relationship between you and your buyers, among other things.

Conclusion

In part 1 of this blog post, we listed 5 typical contracts your startup needs. Feel free to comment below what type of contract your business already uses!

Sources

14 Legal Contracts Your Startup Needs, Law Geex, https://blog.lawgeex.com/14-legal-contracts-your-startup-needs/

Sales and Purchase Agreement, Investopedia, https://www.investopedia.com/terms/s/salesandpurchase.asp

Service Agreement, Definition U.S. Legal, https://definitions.uslegal.com/s/service-agreement/

Commercial Lease, Business Dictionary, http://www.businessdictionary.com/definition/commercial-lease.html

Confidentiality Agreement v. Non-Disclosure, Legal 123, https://legal123.com.au/confidentiality-agreement-vs-non-disclosure/

Founders Agreement, Foundera, https://www.fundera.com/blog/founders-agreement


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