(This is the sixth part of a six part series. The first part can be found here.)
In this final part of our series on the five things you need to do when starting a business, we are going to discuss the importance of having solid business contracts in place.
“Get it in writing!” We hear this all the time from lawyers, business associates, and even from friends and family members. Yet, every day the court system is filled with business disputes due to the lack of a written contract, or a poorly written one. A good portion of these disputes may have been prevented if well-drafted contracts had been in place, saving the parties involved a ton of time and money.
In working with thousands of companies, we can’t tell you how many times we’ve seen the costly consequences of poorly drafted contracts. And those costs can be huge!
People often try to save money by creating their own contracts, or by using a “basic” or “standard” contract template they find online. The problem is, when it comes to business contracts, one size does not fit all. All deals and business relationships are different, so contract language that works for one situation may not work in another. In fact, flaws in a contract could potentially leave the business owner unprotected.
The effectiveness and level of protection provided by a contract are often determined by its details and specificity. It is important that your contracts are tailored to your specific business.
Another important point with contracts is that more is not always better. Some business owners cobble together contracts by gathering various sections of all the contracts they can find online. They put everything in, including the kitchen sink! They think that if they include all of these components, all the bases will be covered. The problem with this approach is they don’t know what they don’t know. Key provisions could still be missing, and certain sections could nullify others, leaving the business owner with increased liability, and potentially at a financial disadvantage.
Some startup owners postpone this crucial step, thinking they will deal with it down the road. Don’t wait! Companies of every size should have well-drafted contracts in place from the beginning.
Not having contracts, or just one mistake in a hastily thrown together contract, can jeopardize your intellectual property, put your confidential information at risk, be financially devastating, and even sink your company!
Solid business contracts are essential for success. If you want to save money with a do-it-yourself project, your business contracts are NOT the place for that. At the very least, have a good business lawyer look over your self-drafted contracts. Better yet, have the lawyer create your contracts for you. The peace of mind knowing they were done correctly will be well worth it!
Have any business contract questions? Please reach out to us. We are here to help!
Tricia Meyer is Founder + Managing Attorney of Meyer Law, one of the fastest growing law firms in the United States. Meyer helps entrepreneurs and technology companies from startups to large corporations with day-to-day matters and notable clients include companies that have appeared on Shark Tank to companies gracing the Inc. 500 to some of the largest companies in the world.
Tricia has been named on the Forbes Next 1000 list, is one of the Most Influential Female Lawyers in Chicago according to Crain’s Chicago Business and been recognized as a top 10 technology lawyer.
As an entrepreneur and a lawyer, Meyer has a unique perspective and has mentored thousands of startups and scaling companies at tech incubators and accelerators across the United States such as 1871, WeWork Labs and Techstars. Tricia has been featured in Inc., Crain’s, Chicago Tribune, NBC Chicago, American Express OPEN Forum, and more.