Essential Contracts Every Small Business & Non-Profit Should Have
Contracts are the foundation of a legally secure business or non-profit organization. Without them, businesses can face miscommunication, financial loss, or even lawsuits. Whether you’re a solo entrepreneur, a small business owner, or managing a growing non-profit, having the right legal agreements in place is crucial.
In this article, we’ll break down the essential contracts every small business and non-profit should have, why they’re important, and how they can protect your organization.
1. Client Service Agreement (For Businesses Providing Services)
What It Does:
A Client Service Agreement outlines the terms of service between your business and your clients. It ensures that expectations, deliverables, payment terms, and liability protections are clearly defined.
Why You Need It:
- Prevents misunderstandings about the scope of work.
- Ensures you get paid on time by setting clear terms.
- Protects against legal disputes over service quality or delivery.
Key Clauses to Include:
- Scope of Work (What services are included?)
- Payment Terms (Deposit required? Late fees?)
- Timeline and Deadlines
- Refund or Cancellation Policy
- Liability Limitations
2. Independent Contractor Agreement (For Hiring Freelancers & Contractors)
What It Does:
This contract sets the terms of engagement for freelancers or independent contractors you hire. It ensures that they are legally classified as non-employees, protecting your business from misclassification lawsuits and tax penalties.
Why You Need It:
- Avoids disputes over ownership of work produced.
- Clearly defines payment and project expectations.
- Protects against misclassification issues that could lead to IRS penalties.
Key Clauses to Include:
- Payment and Invoicing Terms
- Intellectual Property Ownership (Who owns the work created?)
- Non-Disclosure Agreement (NDA) Clause
- Independent Contractor Classification
3. Employment Agreement (For Hiring Employees)
What It Does:
An Employment Agreement outlines the terms of employment for hired staff. It ensures that roles, responsibilities, compensation, benefits, and termination policies are clearly defined.
Why You Need It:
- Avoids misunderstandings between employers and employees.
- Protects confidential information with a non-compete or NDA clause.
- Provides legal protection if an employee is terminated or disputes arise.
Key Clauses to Include:
- Job Title and Responsibilities
- Compensation and Benefits
- Termination Policies (At-will employment?)
- Confidentiality and Non-Compete Clauses
4. Partnership Agreement (If You Have Business Partners)
What It Does:
A Partnership Agreement is critical for businesses with two or more owners. It lays out ownership percentages, roles, profit-sharing, and exit strategies to prevent future disputes.
Why You Need It:
- Clearly defines who owns what and how decisions are made.
- Prevents conflicts by outlining dispute resolution methods.
- Protects the business if a partner wants to leave or sell their share.
Key Clauses to Include:
- Ownership Breakdown
- Decision-Making Authority
- Profit and Loss Distribution
- Exit Strategy and Buyout Plan
5. Non-Disclosure Agreement (NDA) (For Protecting Confidential Information)
What It Does:
An NDA ensures that sensitive business information, such as client lists, financial data, and trade secrets, remains confidential when shared with employees, vendors, or business partners.
Why You Need It:
- Prevents employees or contractors from stealing or misusing confidential information.
- Protects proprietary business practices, strategies, and trade secrets.
- Gives legal grounds for action if information is disclosed without permission.
Key Clauses to Include:
- Definition of Confidential Information
- Duration of Confidentiality Obligation
- Penalties for Breach
6. Terms and Conditions Agreement (For Businesses with a Website or Online Services)
What It Does:
A Terms and Conditions (T&C) Agreement defines the rules users must follow when using your website, purchasing your products, or engaging with your online services.
Why You Need It:
- Limits your legal liability for website usage.
- Protects your intellectual property (content, images, branding).
- Sets expectations for returns, refunds, and service policies.
Key Clauses to Include:
- Acceptable Use of Website
- Payment and Refund Policy
- Liability Disclaimer
- Privacy Policy
Conclusion
Contracts are an essential tool to protect your business, employees, clients, and intellectual property. Whether you’re running a small business or a non-profit, having well-drafted contracts can prevent costly disputes and legal headaches.
Need help drafting or reviewing a contract?
Contact us today to ensure your agreements are legally sound and tailored to your business needs.
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