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Legal Documents Every Business Should Have
Legal Documents for a business plays an essential role in protecting the interests of a business and the business owners over the course of a company’s lifetime. Tackling your legal needs can seem like a daunting task, but it doesn’t have to be. It’s often wiser to start protecting your business at the very start and not leave it until it’s too late. There are a number of key legal documents that are essential for a business’ success.
1.Confidentiality Agreement
In the excitement of setting up a business, it’s natural to want to share your ideas with family and friends. But remember, once an idea is out there, it can’t be drawn back in.
If you are working with potential business partners and will share your business ideas with them, ask them to sign a Confidentiality Agreement (also known as a Non-disclosure Agreement or NDA), under which they are legally bound not to disclose your confidential information to a third party, and may only use that information for a specified reason.
Non-disclosure agreements forbid your business partners or employees from disclosing confidential and proprietary information of your Company. NDA is documents every business should have
In case of employee, before sharing any confidential information employee should put confidentiality expectations in written form so that employee gets clear about his/her limitation to share information.
If anyone violated NDA he/she will be sued for damages to compensate your business for any lost profits. Hence it is considered as important Legal Document for Business.
2.Shareholders’ Agreement or Partnership Agreement
A Shareholders’ Agreement is an agreement between the shareholders of a company and sets out a number of key rules as to how the business will be run, ensuring that the shareholders cooperate and there is continuity throughout the life of the company.
This document should cover who the shareholders are, their rights and responsibilities, and what will happen if and when they decide to leave the company.
If you operate under a business partnership, make sure you have a Partnership Agreement in place that sets out how decisions are made and profits (and liabilities) are shared. You can make several legal documents for your partnership business.
Everyone involved in partnership / shareholders’ agreement should understand the terms and conditions of partnership/shareholder and agree otherwise legal disputes can be consequences in the future and lead your business to no where.
3.Employment Contract
An employment relationship should be documented right from the outset. An Employment Contract sets out the obligations and expectations of both the company and the employee in order to minimize potential disputes.
An Employment Contract should cover key areas such as
- probation period,
- pay,
- benefits,
- hours,
- annual leave, and
- Termination
An employment agreement clarifies the expectations of both parties (employee and employer) that helps to settle expected future conflict. Employment contract is one of the important Legal Document for Business
4.Memorandum of Understanding
MoU stands for Memorandum of Understanding. It is an important Legal Document for Business containing important conversation with your suppliers, potential partners and others involved in the business.
It’s a milestone towards the realisation of a project with the input of different parties and is used at the Intention Stage of a project.
A comprehensive MoU should set a clear roadmap to its parties on how they will perhaps move from the Intention Stage to the Contract Stage. The parties may never be able to move on from Intention Stage without an MoU.
5.Non-Compete Agreement
A covenant not to compete is a contractual obligation between an employer and employee or contractor, by which the employee or contractor agrees not to work for competitors of the employer or to open a competing business after the employee or contractor completes their service. Restrictions to compete can be for a specific amount of time, in a specific field, and a specific geography.
Non-compete lowers the risk for employee about its trade secret client lists, and other strategic resources. It allows companies to claim a protectable interest in employees’ expertise and “inside knowledge” as well as their work.
For Employee, non-compete clauses hinders. Experts have acknowledge that such clause limit’s employees personal abilities as they are restricted to implement their ideas and limit to certain period of time.
Non-Competition Agreements, or non-compete clauses can help a company retain valuable employees, protect confidential information, such as its intellectual property or its trade secrets and customers, and prevent unfair competition.
6.Website Privacy Policy and Website Terms of Use
As e-commerce has grown, legislation that governs online business has become stricter. Website providers should clarify how personal data (e.g. name, contact details) provided by users will be used by using a Website Privacy Policy.
By clarifying the scope of personal data usage and protection, website providers can comply with legal or regulatory requirements connected with data collection and avoid future disputes concerning data privacy infringement. A Website Terms of Use sets out the legal relationship between the website operator and users and ensures that users agree to your terms when using your website.
Users often agree to website terms by ticking a box or are bound by the terms simply by using the website.
These two documents are key even if you are not selling goods or services online.
7.Purchase Order, Invoice, and First Payment Reminder Letter
Good cash flow is essential for a healthy business. Clearly set out payment terms in a Purchase Order when you start to engage customers.
Issue Invoices on time and keep track of all payment related documents as these will be critical when chasing up debts. Make sure you understand how to deal with late payments and follow the right procedures to collect your money. If a customer is late in paying your invoice, send a formal First Payment Reminder Letter. It can prompt a customer to pay the overdue invoice so you stay on top of your cash flow.
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