Think About Your Big Relationships
When I sit down with new business owners, I ask about their key relationships—customers, suppliers, independent contractors, partners. Each of those relationships should have something in writing. It does not need to be complex. Sometimes it is a simple client agreement or a one-page sheet with key terms. But if a significant relationship has nothing documented, you are setting yourself up for conflict.
What Should a Contract Cover?
For every important relationship, brainstorm: What could go wrong? Who owns the intellectual property they produce? How much will you pay, and when? What happens if something gets damaged—who is responsible? Those questions drive what belongs in the contract. If you use a major platform like Google Workspace, you just accept their terms. But for relationships where the stakes are meaningful, you need your own written agreement.
Employees Get Policies, Not Contracts
With employees, you generally do not want a contract—you want employment policies. Why? Because policies can be updated as business needs change without requiring employee consent. A contract requires both parties to agree to amendments, which limits your flexibility. Policies give you the ability to adapt while still setting clear expectations.
Oral Agreements Are a Liability
Even without a written agreement, you probably have something spoken—and if there is ever a dispute, it comes down to “he said, she said.” A written document, even an email confirming key terms, means everyone can see in black and white what was agreed to. That clarity prevents frustration, legal problems, and expensive surprises down the road.
Video Transcript
What Contracts Does a New Business Need?
When I sit down with clients who have set up a new business, I usually ask them about the big relationships they have, and usually, they have relationships with customers or clients. So you are going to have some sort of contract for that. And it might be a simple, you know, client agreement or new customer form, or sometimes it is just a quick little sheet with a few key terms on it. And then, you, as a business owner, probably also have contracts with suppliers, independent contractors, vendors, somebody that is providing you the stuff that you need to run the business. Sometimes there is already contracts out there, like if you want to use Google’s email suite called G Suite, you just accept Google’s terms of use. You don’t actually write up a contract for that with Google. So that is kind of an easy example. You don’t need something special for that. But if you have other relationships that are significant and there isn’t anything in writing, you would think about, does it make sense to have a contract in writing? Should there be any sort of problems?
How Do I Know if There Are Problems?
You might say, “Well, how do I know if there are problems?” We brainstorm. What are problems that could arise with this important relationship? For example, who will own the intellectual property that they produce? How much will you pay? When will you pay? What happens if there is damage to something, who is responsible? All that kind of stuff gets handled in those contracts. Then, you might also have people who work with you. Those will be employees, independent contractors, or business partners, and you want to have something in writing with them. Usually, for independent contractors and business partners, you have a contract that can go by a number of different names. For example, an independent contractor, you would have an independent contractor agreement. With a business partner, you might have a partnership agreement or an LLC member agreement or a corporate shareholder agreement, something like that.
Contracts With Employees
With employees, you generally don’t have a contract. In fact, you often want to say, we don’t have a contract, but you are allowed to have employment policies, and in light of the fact that employment policies change from time to time and need to be updated, business owners want the right to change those without having the employee have to approve them. Think about in a contract, the other party has to agree to any amendments. So that is one reason why I encourage companies to have employment policies with their employees, not employment contracts with their employees.
So, What Contracts Do You Need?
I think about the big relationships that you have in the business who supplies stuff to you, who do you supply stuff to, and who are you working with? If you don’t have contracts or some sort of written document around what that relationship looks like, the expectations, the terms, and how you will interact with each other. If you don’t have that, you may find conflict later and frustration later, and legal problems later.
Should You Consider Having Oral Contracts?
By the way, even if you don’t have something in writing, you probably have something orally spoken. And in that case, if there is ever a dispute, it comes down to he said, she said, who said what? And that is why it is always better to have it in writing or virtually always better, because at least everybody can look at that piece of paper and see in black and white, here is what we’ve agreed to. It is undisputed. And that might even be just emailed to each other, or maybe it is signed, but you have something where you are talking about expectations in advance to avoid problems down the road.
Conclusion
All right, if you have any constructive feedback, please feel free to provide that. I am somewhat new to this, and I am working to provide value that is relevant to you as business owners and other listeners interested in entrepreneurial and business topics. It is my goal to demystify business law so that people have practical understanding and are empowered to run their business and avoid legal problems and hopefully experience a better business and a better life.
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