Small Business Brief

Attorneys & Legal

Getting Your Affairs in Order: 7 Types of Legal Documents Business Owners Need

It’s estimated that approximately 50 percent of all small businesses fail within the first four years of being opened. While this is a rather discouraging statistic, there are several things you can do to help ensure your business’s success.  

One of these things is having all your “ducks in a row,” as the saying goes.

The best way to ensure your business is set up for success is by getting to know the types of legal documents you should have. Keep reading to find out what these documents are.

1. A Business Plan

Virtually every business is going to need at least some funding to get started. Having a quality business plan can help you get the investment you need.

When creating a business plan, make sure it contains three vital pieces of information:

  • The problem you are trying to solve
  • The way you plan to solve it
  • Why the business you own is best for solving the problem

Business plans should be structured in a way to present all the above information and cover everything a potential investor may want to know.

Put simply, business plans are a clear and concise statement of why you need funding, along with how it’s going to be spent, and how you plan to get it back. This ensures your investors can make an informed decision about if they should invest in your business.

During the due diligence stage of their decision making, any investor is going to want to see your business plan. Make sure you have one.

2. A Non-Disclosure Agreement

It doesn’t matter if you realize it or not, your business is going to have information that needs to remain private. This includes things like your financial records, customer list, and even ideas you have for a new pricing plan.

The NDA is your business’s first line of defense when it comes to protecting information. This legal document creates a confidential relationship between you/your business and your business partners, employees, and contractors who may get to see “behind the scenes.”

3. A Living Will

When you own a business, you have to be prepared for anything. At the most basic level, your will is going to determine what happens to your property and assets after you die.

If you pass away without this document in place, it will be the court that decides all this- including what happens to your business.

According to attorneys at the De Bruin Law Firm, you need to have a will in place to ensure your business goes to your children, or that any other wishes you have are carried out. Without this document, there’s no way to know what’s going to happen.

4. A Buy/Sell Agreement

In today’s competitive business environment, startups and small businesses can’t afford to have any issues. One thing that may cause several problems is if you don’t have a buy/sell agreement.

Buy/sell agreements are agreements between at least two parties and is useful in several situations. The fact is, business relationships are constantly changing and evolving.

You, or one of your partners may opt to leave, or a new partner may be brought on board. The buy/sell agreement sets up the arrangement in advance, making the transition easier for everyone who is involved.

Other times this agreement is beneficial include:

  • You or your partner wants to retire
  • You want to pass the business on to an heir
  • Someone declares bankruptcy or gets divorced
  • You or your partner is injured or ill

In each of these situations, having a buy/sell agreement can help to reduce the issues that may arise without it.

5. Employee Agreement

This is a contract that sets up the expectation and obligations of a business and employees. Its purpose is to minimize the possibility of future disputes.

While not every higher is going to require the use of an employment agreement, the document is beneficial if you want to dissuade new hires from leaving you and disclosing sensitive information to your competition.

It’s a good idea to have your contract evaluated by a legal professional. This will ensure everything is legal and no potentially misleading or harmful statements are included.

6. A Non-Compete Agreement

Today, there are more businesses than ever before using non-compete agreements. In a competitive industry, this agreement (when properly drafted) can help you protect your confidential and proprietary business information.

A non-compete agreement is usually going to restrict your employee’s ability to work for any competing business with a certain geographic area, for a specific amount of time.

7. Online Terms of Use

This is not a document you are required to have by law. However, if you have a website you need to have online terms of use.

This is the page that will limit your liability if there are errors in your content, as well as information that’s contained in any hyperlinks found on your site. Additionally, the terms should let visitors to your site know what they are able to do and not do no your website.

This is especially important if visitors can common on your blogs or share content of their own.

Types of Legal Documents You Need: Now You Know

As you can see, as a business owner, there are several types of legal documents you need to have in place. These are designed to protect your business and your assets while helping your business achieve success.

If you found the information here helpful, then be sure to check out some of our other blogs. For example, we provide information on how to get a customer to come back to your store.

If you want a successful business, you have to make sure everything is in place. The information here can help you do this.