Essential Contracts Every Business Should HaveAssociation of Business Training
December 4, 2012 — 802 views
In order to minimize expensive litigation due to misunderstandings, certain business contracts should be established. Before a business opens its doors for clients or customers, there should be an operating agreement in place. Other essential contracts include employment contracts and contracts with suppliers and vendors. Here is an overview of business contracts generally considered to be the most important.
1) Operating Agreement.
Any business with more than one owner needs to have an operating agreement that establishes the obligations of each owner and the terms of how the business will be run. In order to prevent later disputes, this contract should cover all contingencies the parties can imagine. Some suggestions for items that should be included are as follows.
• The structure of the business, whether it is a partnership or a type of corporation.
• Operating hours of the business.
• Number of employees there will be and an agreement on their job descriptions.
• Determine who is responsible for relevant portions of running the business. For example, who orders supplies? Who actually writes the checks to pay the bills?
• How the profits will be divided.
• What will happen if certain events occur, such as disability or death of one partner.
2) Employment contracts.
Even if the business only has one employee, the business needs to have an established employment contract. Among other terms specific to the business, employment contracts should include:
• The specific job description that establishes exactly what the employer expects from the employee.
• Hours of employment and how vacation time is calculated.
• The wages and whether they are paid hourly, weekly or monthly.
• Any restrictions on employment with competing businesses if the employment is terminated.
• Any restrictions on disclosure of business secrets both while employed and after the employment is terminated.
• How often job evaluations will occur.
• The company policy on Internet and computer use during work hours.
3) Contracts with suppliers or vendors.
Whether the supplier provides goods to be resold to a retail business or provides business supplies or services needed for the day to day management of the business, the business needs to have a contract with the supplier or vendor. Supplier or vendor contracts should include the following.
• Itemization of what is being provided.
• Price of items or services.
• How items or services will be paid for, whether credit or cash.
• Date of delivery of items or services.
• Consequences of the failure of the vendor or supplier to perform.