6 Key Legal Documents for Your Small Biz
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This is a guest blog post by Kunbi Odubogun and Leah Weinberg of Oduberg, a law firm for small businesses and creative entrepreneurs in New York, Pennsylvania, Georgia, and Washington DC.
You started a business because you wanted to pursue a passion, or be able to support you and your loved ones. Now that you have an established or growing business, there is likely one area you may have overlooked: legal documents your small business needs in order to protect you, it, and others you work with.
Legal discussions can sometimes put many people on edge. However, a topic can be uncomfortable yet still very valuable and important to address with yourself as a small business owner. As lawyers, we understand your fears and concerns about all the legal jargon that can be confusing when navigating how to legally protect your business. It’s a key part of why we started our practice, Oduberg Law, LLP.
As co-founders of a law firm for small business owners and entrepreneurs created by small business owners and entrepreneurs, we’re sharing six key legal documents that you’ll need to ensure your business is legally protected.
Note: This blog post does not constitute legal advice or an attorney-client relationship. You should consult with your own legal counsel or reach out to our offices if you’re in need of legal services.
1. Foundational Agreement
If you’re a small business that has two or more owners, you’ll need a foundational agreement for the business, such as an operating agreement for a limited liability company (LLC), a partnership agreement for one of the various types of partnerships, or articles of incorporation and by-laws for a corporation.
Regardless of the specific type of foundational agreement that fits your business needs, it’s important to understand how critical the agreement is in general since it establishes the business relationship between you and the other owners. This includes a clear understanding of, and express terms regarding compensation, roles, expectations, how decisions are made, and most important, what happens if someone wants to leave the business — or how they might be removed from the business.
We understand how scary that last part can be to process — but things do happen in business every day. Think of it like a prenuptial (or prenup) agreement for your business because as important as the day-to-day relationship is, so too is how the relationship ends. When business partners split up, it’s usually because something fundamentally changed from the day they went into business together. The reason could be due to a happy change, or possibly a sad one.
Business partners need to be prepared for the time when their visions and lives are no longer aligned. This is a natural course of a business relationship, so please don’t be hard on yourself as a business owner when you approach this particular fork in the road.
2. Service Agreement
If you’re a small business that is service based, then you definitely need a service agreement for the services you’ll provide to others. This agreement is typically entered into with the client (or customer) and outlines critical points such as scope of services, compensation or pay rate, obligations and responsibilities of each party, default or terms of termination, who owns any materials being created, and much more. This is the principal agreement that governs the service provider-client relationship and is the first thing either side will reference if something goes wrong.
For example, if you’re a photographer and you have a growing wedding photography business, you should be having your clients sign service agreements in order to protect you and your business and set terms that they must agree to in order to receive your services. You decide your rates, what you will or won’t provide, and what happens if payment(s) is not received.
Without a service agreement, a service-based business puts itself into murky waters as the tangible assets you provide is your intellect, talent, and particular skill set. No one wants to be taken advantage of!
3. Sales Agreement
If you’re a small business that sells products, then you’ll need an agreement that governs the terms of the sale. This typically will include a description of the item, the cost, the condition it’s provided in, any warranties, your return or exchange policy, among other things. And if you actually create custom products for your business, then these terms become even more specific in regards to things such as production timing, if the client gets to review any proofs in advance, a stricter refund policy, and any input needed from the client to create the product.
For example, if you’re a custom apparel maker, then you should have your clients sign a detailed sales agreement. This is because your products are one-of-a-kind, and custom work takes considerably more time and materials than mass-produced apparel.
Without a sales agreement, a business that sells products puts itself into a potentially tough position if something goes wrong for either party.
4. Non-Disclosure Agreement
You’ve probably heard of this document as something that’s a must-have for your business. And that’s 100% correct. A non-disclosure agreement (NDA) protects proprietary, confidential, and non-public information and can be used whether it’s in a hiring agreement or for a collaborative project, exploring a potential business relationship, or having your advisors review something you’re working on. Kind of like things that happen in Vegas, you want to make sure your confidential information stays confidential.
Every business should have an NDA ready to go for any time they need it. Certain confidential information will be shared when you’re evaluating going into business with someone else, thinking about working on a one-off project together, pitching investors or brands, and other scenarios. It’s critical to have an agreement in place that prevents the party receiving that information from disclosing it.
5. Employment or Independent Contractor Agreement
For anyone who hires someone to work with them in their business, they will need an employment agreement or independent contract agreement. When deciding which agreement is best for your needs as a small business owner, it’s imperative to know your state laws on how your state defines an employee versus an independent contractor. You’ll want to make sure that you’re classifying the person correctly and then enter into an agreement with them accordingly.
As most of society understands it, an employer-employee relationship allows the employer to hire someone while having more control over the employee’s activities while employed and after employment — such as non-compete, non-solicitation, and non-recruit provisions normally found in a new employee’s offer letter or employment agreement. Those same restrictions are not always enforceable against an independent contractor.
At the same time, depending on your state law and the size of your company, if your business has employees that also means it may have to be cognizant of requirements related to health insurance, paid time off, minimum wage, overtime, maintaining workers’ compensation, among others. Whereas, with an independent contractor, these requirements aren’t automatically something they would be entitled to — unless they’re included in the agreement they have with your business.
Which scenario is better? That is up to you and whomever you hope to hire for your unique business needs and goals. You get to make these informed decisions with all the information available to you.
6. Website Policy
If you’re a business that collects people’s information on your website or sells something online, your website must have a Terms of Use, Privacy Policy, Disclaimer, and possibly more depending on the nature of what information you’re receiving online.
The Terms of Use governs how someone uses your website, what they can or can’t do with information on your site, any warranties or non-guarantees for the information or services on your site, what to do if they have an issue with your product or service, and much more.
The Privacy Policy discloses what information your small business will collect from individuals who use your site, and what you plan to do with that information. It’s very important to note that there are state and federal laws and, depending on where your users are located, international laws that have to be complied with in terms of personal data usage and protection of that data when collected.
The Disclaimer is intended to release you, the website owner, of liability for how someone uses the information on the website.
We know this is a ton of information and can feel overwhelming. But, we encourage you to use these six key documents to help legally protect your business.
Want to speak with a legal professional about legal needs for your small business or entrepreneurial journey? You can reach out to our team at Oduberg Law, LLP — we’re always happy to be of service.
Meet the Authors:
Kunbi Odubogun
Kunbi Odubogun – co-founder of Oduberg Law, LLP and co-owner of contract template shop Legally Set – is a business attorney, speaker, and digital media expert with over 12 years experience in the creative and legal industries.
As a seasoned lawyer, Kunbi has dedicated her career to helping small businesses be legally set and secure on their paths to success.
She is the founder of two online businesses — Perfete, a digital media platform focused on highlighting the celebratory moments of life, and Legally Set, an e-commerce store offering legally sound, attorney-drafted contract templates for entrepreneurs, event professionals, and creative business owners.
Kunbi is admitted to practice in New York, Pennsylvania, and Washington DC.
Leah Weinberg
Leah Weinberg – co-founder of Oduberg Law, LLP and co-owner of contract template shop Legally Set – is an attorney, a recovering wedding planner, and the author of The Wedding Roller Coaster.
After nearly a decade in the wedding industry as the owner of Color Pop Events, a New York City-based wedding planning company, Leah is returning to her roots as an attorney to assist her former colleagues in the events industry, along with other entrepreneurs and business owners.
Her work and insights have been published online and in print with Vogue, the New York Times, People, CNN, CNBC, Bravo, Martha Stewart, and The Knot, among others.
A WeddingPro Educator with The Knot + WeddingWire since 2020, Leah travels throughout the country sharing insight with her peers regionally, as well as at national conferences such as Alt Summit, NACE Experience, and The Special Event.
Leah is admitted to practice in New York and Georgia.
