In the business world, contracts are crucial for protecting your interests and keeping operations running smoothly. Having the right contracts in place helps you avoid legal troubles and maintain strong business relationships.

Here are the top five key contracts every business must know, especially when working with a business attorney, business lawyer, LLC attorney, or contract attorney.

Top five contracts every business owner should know

1. Co-Ownership or Joint Venture Agreements. 

A. Partnership Agreement

When you’re starting a business partnership, a partnership agreement is crucial. This document spells out the roles, responsibilities, and expectations of each partner. It also details how profits and losses will be shared, how decisions will be made, and how disputes will be resolved.

Key elements to include:

• Contributions from each partner
• Division of profits and losses
• Management responsibilities
• Dispute resolution procedures
• Terms for ending the partnership

A well-crafted partnership agreement helps avoid misunderstandings and conflicts, leading to a smoother partnership. Consulting a partnership lawyer can help ensure the agreement meets your business’s specific needs.

B. Shareholder Agreement for Corporations 

A shareholders agreement is a contract among the holders of the company’s stock, whereby the shareholders collectively agree to act or restrict their ability to act in certain ways that they presently agree serve the interests of the company. This agreement effectively attaches the shares to certain instructions when certain shareholder rights arise.

Key elements of this agreement include:

• Share voting requirements
• Stock sale/resale restrictions or requirements, including rights of first refusal, preemptive rights, and drag-along and tag-along rights
• Vesting terms
• Required appointments to the Board of Directors and of certain officers
• Buy-sell terms and instructions on share valuations

While there are myriad ways in which shareholders can disagree on the direction and governance of a company, several can be dealt with contractually long before a dispute arises. This pre-planning helps ensure that a company has objective measures by which it can quickly address corporate matters that might otherwise slow a company down. A seasoned corporate attorney can help a company set itself up for prolonged success by helping the company negotiate a robust shareholders agreement.

C. Operating Agreement for LLCs

If you have a business organized as a Limited Liability Company (LLC), an operating agreement is essential. This document spells out who owns what and what each member’s duties are, creating a clear structure for how the business will run.

Key Elements to Include:

• Capital contributions 
• Roles and responsibilities of members
• Voting rights and procedures
• How profits and losses are shared
• Management structure
• How to add or remove members
• Dissolution procedures

An operating agreement helps establish how the LLC is managed and operates, protecting everyone’s interests. An LLC attorney can make sure your operating agreement follows state laws and fits your business needs.

2. Non-Disclosure Agreement (NDA)

Non-disclosure agreements (NDAs) are essential for keeping your business’s confidential information safe. They ensure that sensitive details like trade secrets, proprietary processes, and client lists stay private.

Key elements to include:

• What counts as confidential information
• Responsibilities of the person receiving the information
• How long the confidentiality lasts
• What information is not covered by the NDA
• Penalties for breaking the agreement

NDAs are especially important when you’re discussing potential deals or partnerships. A contract attorney can help you create a strong NDA to protect your intellectual property and other sensitive data.

3. Employment Agreement/Offer Letter

Employment contracts lay out the terms between your company and your employees. They’re important for clearly defining job roles, salaries, benefits, and reasons someone might be let go. Key elements to include:

• Job description and duties
• Compensation and benefits
• Confidentiality agreements
• Non-compete clauses
• Conditions for termination

The right employment agreement ensures clear expectations, and protects both the employer and employee, while minimizing the risk of legal disputes. An employment law attorney can help make sure these contracts follow labor laws and secure your business from legal problems.

4. Service Agreement

A service agreement, or service contract, is used when one party is hired to provide services to another. This agreement outlines what services will be provided, how and when payments will be made, and the responsibilities of each party.

Key elements to include:

• Description of the services
• Payment terms and schedule
• Duration of the agreement
• Termination conditions
• How disputes will be resolved, limitations on liability 

Service agreements are crucial for setting clear expectations and making sure both parties know their obligations. A contract attorney can help you create effective service agreements that protect your business interests.

5. Licensing Agreement 

A licensing agreement is an agreement whereby one party agrees to let the other party use their proprietary intangible assets, subject to certain conditions. This agreement spells out which assets a party is allowed to use, and how they may be used, as well as what the owner of such assets may be entitled to in exchange for such use.

Key elements to include:

• Very specific identification of the intangible assets the parties are allowing to be used
• The geographic area for which the license is granted
• Exclusive or non-exclusive usage
• Clear lines drawn around ownership of any intangible assets
• Ongoing confidentiality obligations of the parties (even after termination of the license)

Some of the most valuable assets of a company are often its intangible assets, such as software code, logos, media, and even recipes. Companies should be careful about how they go about letting others use those intangible assets (or how they use the intangible assets of others). An attorney that specializes in commercial contracts and intellectual property protections can help you establish effective licensing arrangements and protect yourself from misuse and unintended appropriation of your valuable assets.

Strategy Law: Your business’s trusted partner for all legal needs 

At Strategy Law LLP, we help businesses handle the complexities of legal contracts. Our team of experienced corporate attorneys is committed to providing the legal support your business needs to stay protected. Whether you need help drafting an operating agreement, employment contract, NDA, service agreement, or partnership agreement, we’ve got you covered. Contact us today to schedule a consultation and secure your business’s future.

This blog is written as of September 2024.  Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites. 

All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations.  No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation.

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