5 Steps to Crafting Strong Business Contracts
As a small business owner, you need to collaborate with lots of different stakeholders. Whether you’re selling services or products to a client, renting or buying expensive equipment, signing a lease for an office space, reaching out to a new vendor or supplier, or establishing a business partnership, you enter complex legal agreements every day.
In order to protect your company’s interests, you need to use contracts that clearly outline fair terms for you and the other parties involved in any transaction or partnership. These tips will walk you through every step of creating appropriate contracts, from writing up your initial terms to negotiating for a final agreement.
Why Do You Need Contracts?
Perhaps you’ve only recently launched your business, and you never had to deal with contracts while working for someone else at a 9-to-5 job. Therefore, you might not realize why contracts are so crucial for entrepreneurs. Contracts are not just “nice to have” – they’re essential business documents that work for the benefit of you, your partners, your vendors, and your clients. Contiguglia states that written contracts are necessary because they offer clarity, proof of agreement details, legal enforceability, financial and legal protection, guidelines for dispute navigation, and confidentiality for all parties.
Using Accounting Software
Before you sit down to work out any contracts, you need to assess your company’s financial status with accounting software. With a comprehensive, easy to use accounting system, you’ll be able to organize all of your financial documents in one system and analyze your expenses, income, revenue, and overall cash flow. You’ll be able to reference these figures as you move through contract development and negotiations, allowing you to make smart, well-reasoned decisions for your business agreements. Having a full understanding of your company’s financial health will enable you to establish contracts that serve your business.
Other Tools for Designing Contracts
In addition to accounting software, what else do you need to create contracts? There are lots of different tools and programs you can use to craft and manage contracts moving forward. You can use contract management software to automate and customize basic contracts, as well as document transfer software to send contracts to other parties and obtain their signatures virtually. Finally, you can use a free logo creator for quick custom logo design if you want to add your company’s logo to your contracts. Choose from a variety of editable templates and add your own design assets.
How to Write a Contract
Now, you’re ready to start writing up a contract – but you might be wondering where to begin. You’ll get started by determining which state’s laws apply to the contract, the parties bound by the contract, and the precise obligations for each party, such as payment amounts and deadlines, services rendered, or assets to be exchanged. Next, you’ll decide on methods for dispute resolution, actions that would qualify as a breach of contract, and guidelines for ending the contract and releasing parties from the terms. Before anyone signs anything, all parties will need to read over the entire contract in full. They might also need to present it to their lawyers or their companies’ legal departments.
Navigating Contract Negotiations
Sometimes, you’ll need to engage in some back-and-forth with others over the terms of the contract. Negotiations are normal, and you should be prepared to make some compromises in order to settle on mutually agreeable terms. When you’re negotiating a contract, be sure not to rush, and take care to protect the privacy of everyone involved. Talk to additional important stakeholders if necessary, and contribute supplementary research to back up your term recommendations. Finally, try to keep negotiations on track by guiding the conversation towards key objectives – you don’t want to lose sight of your priorities in the midst of negotiations.
Working With a Business Attorney
What if you have no idea how to start writing a contract from scratch? Don’t worry – that’s a fairly common predicament for many entrepreneurs, especially those who haven’t been in business long. But you don’t have to tackle this process alone. You may want to hire a business attorney to assist you in this area.
How can you go about hiring the right business attorney for this task? Gouchev Law recommends working with a smaller corporate law firm with a good local reputation. You should ensure that your lawyer has a history of experience in contract law specifically.
Business law can be complicated. But this isn’t a reason to ignore the importance of contracts or try to set up business agreements without them – a handshake and a promise are not enough to protect your interests if things go south. By following these tips, you’ll be able to write contracts that allow you to engage in new business agreements with peace of mind.
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