When starting a new business, it’s wise to put key contracts in place to protect your interests and clarify relationships. The exact documents needed can vary with your business type, but common agreements include:
- Founders’ or Partnership Agreement: If you have co-founders or partners, a written agreement among you defines each person’s roles, ownership shares, and what happens if someone leaves. For companies, this is often a shareholders’ agreement (for limited companies) or a partnership agreement (for partnerships). Such agreements help prevent disputes by clearly outlining decision-making power, profit sharing, and exit plans.
- Constitutional Documents: If you register a limited company, you will have articles of association (a public document filed upon incorporation). The articles set basic rules for running the company, but they are often supplemented by the private shareholders’ agreement as mentioned above for more detailed arrangements between owners.
- Client and Supplier Contracts: Any business providing services or goods should use written contracts or terms and conditions with its customers and suppliers. These contracts cover the scope of work or products, pricing, delivery terms, payment conditions, and what happens if something goes wrong. Having clear contracts with customers and vendors ensures everyone knows their obligations and can reduce the chance of disputes.
- Employment or Contractor Agreements: If you plan to hire employees or engage freelancers, have a written employment contract or independent contractor agreement in place. These documents set out the role, compensation, working hours, confidentiality obligations, and termination notice periods for your staff or contractors. In the UK, providing employees with a written statement of their main terms is a legal requirement when they start work. For contractors, a contract clarifies they are self-employed and outlines the project or services they’ll provide.
- Non-Disclosure Agreements (NDAs): When discussing business ideas or sharing sensitive information with potential partners, investors, or contractors, an NDA can protect your confidential information. An NDA is a contract that legally binds the other party to keep your trade secrets, business plans, client lists, or other sensitive info private. Using an NDA early on can prevent valuable information from being misused or disclosed.
- Commercial Lease or Premises Agreement: If your business will operate from a physical location (like an office, store, or workshop), you’ll likely sign a commercial lease with a landlord. This lease contract gives your business the right to occupy the premises and sets out terms like rent, lease length, and responsibilities for maintenance (more on leases in the Property section). Always read premises agreements carefully or have a solicitor review them, as they are significant long-term commitments.
- Website and Online Policies: For businesses that operate online or have a web presence, consider having a website terms of use, privacy policy, and (if you sell goods/services online) terms of sale. These are often not strictly “contracts” that you sign with someone, but they are legal documents that govern customer interactions and compliance (for example, privacy policies are required under data protection laws).
Every business is unique, so you might need additional documents (for instance, a franchise agreement if you’re buying a franchise, or loan agreements if borrowing money). The key is to identify the relationships and transactions critical to your business and ensure each is backed by a clear, written contract. Investing time in these contracts upfront can save you from costly legal headaches in the future. Many entrepreneurs turn to the services of British Contracts to obtain solicitor-drafted bespoke contracts for these agreements, ensuring their contracts are robust from the outset.