Contracts help businesses work successfully with different parties. These agreements have clear terms that are intended to protect both parties. A business contract should have essential clauses to achieve this goal.
You need contracts in several situations. This is due to the vast range of operations observed to run your business. Below are four times when contracts are necessary:
1. When hiring employees
An employment contract states an employee’s job position, duties, employment type (contract, full-time, part-time or project-based), work hours and days and payment. It should also discuss confidential requirements and dispute resolution measures. Further, you should explain issues that can lead to termination and steps that will be taken for a fair dismissal.
2. Going into partnerships
Business partnerships are advantageous. Your company will have more capital and possibly access to a new market and industry-leading talent. Besides, you will have moral support during tough times. Nonetheless, a partnership can negatively cost you, particularly if you don’t protect your business.
For this reason, you need a partnership contract. It should include the percentage of ownership, length of the partnership, business operations, division of profits and losses, leadership structure, decision-making process and dispute resolution.
3. While working with shareholders
If your business has grown to have shareholders, you need contracts for them. A shareholders agreement includes the dates the shares were issued, the number of shares owned by each member (percentage of ownership), how and how not to transfer shares and the rights and obligations of each member.
4. When getting supplies
Suppliers keep businesses going by providing needed products or services. But you need contracts to ensure they perform as needed. Factors to include in this agreement type are service or product description, timeframes, payment details and processes, after-sales service, performance criteria and refunds and compensation terms.
You should have binding contracts in all aspects of your business. It will help to draft top-notch contracts to avoid disputes.