Crafting Effective Contracts for Your Business

Businesses are built on effective contracts. Nearly every aspect of your venture’s operations, from the developer who creates your website to the office space you rent, will be governed by a contract. Because of that, strong, effective contracts are an essential asset for any business.

We’ve outlined below how legal counsel can strengthen your company’s contracts in situations that businesses often encounter early in their life cycles.

Business Leases: Finding a Home for Your Company

Most people have signed a lease at some point, but the typical business lease is very different from the kind used to rent an apartment. Business leases include terms like “additional rent”, “good guy” clauses, and use restrictions that don’t appear in residential leases, which makes negotiating these agreements much less intuitive. In order to secure a space and terms that work for your business, expert guidance is indispensable. A thoughtful, well-written, properly negotiated lease will help you avoid potential pitfalls so you can feel secure in your company’s new home.

Non-Disclosure Agreements: Protecting Your Sensitive Information

You’re likely familiar with the basic premise of an NDA—essentially, a contract in which two or more parties enter into a confidential relationship and agree not to share sensitive information with others. Although relatively well known, we find that these agreements are not used as frequently as they should be, and when they are implemented, they’re often needlessly complicated.

Whenever you are contemplating a new relationship with an outside provider or stakeholder, it’s essential to ensure that your sensitive information remains yours, and a clear and straightforward NDA is the ideal way to do it.  Also, beware of signing NDAs presented to you by potential counterparties without proper review, as they can limit your ability to do business in ways you might not have foreseen.

Production Agreements: Setting Standards for Quality

You can’t do everything yourself, and bringing in other people or businesses to assist with production is often a necessary step for growing your company. When that time comes, however, it’s important that you retain control over both the means of production and the end products.

For that, you’ll need a robust production agreement tailored to your business. Relying on poorly drafted or boilerplate agreements can have serious unintended consequences, including liability for faulty products and damage to your reputation.

Licensing Agreements: Sharing Intellectual Property

Your intellectual property is your business’s greatest asset. As the recent settlement over Peloton’s use of music illustrates, allowing a third party to use your IP can be an important money-making opportunity, but only when paired with protections that keep your work secure and compensate you fairly. Making use of outside IP can also be lucrative, but excessive restrictions can limit growth prospects.

No matter which route you pursue, you’ll want to work with a legal team to create a secure an equitable licensing agreement that governs the relationship between the parties involved. A properly drafted licensing agreement will protect your rights as an IP owner, and if you are sourcing work from a third party, it will ensure that you receive what you need to achieve your goals.

Vendors: Managing Day-to-Day Business Needs

Even in the early phases of your business, the list of potential vendors you might encounter is long: web developers, marketing partners, office equipment suppliers, IT services, SaaS licenses, and more. While many of these contracts are straightforward, some may require more nuance and negotiation. When those situations arise, it’s important to have an attorney with experience in documenting these types of relationships review your contracts before you get locked into an unfavorable contract.  It is much less expensive to negotiate a fair contract than it is to get out of an unfair one.

Sales Reps: Setting the Stage for Growth

Bringing in a sales rep can unlock serious growth for your business, and it’s an important step to get right. At the same time, it can be a challenging relationship to negotiate, especially since there are many sales-specific provisions to work out in the corresponding contract, and employee/independent contracting compliance issues to be concerned about.

From commission and compensation structures to time, place, and manner issues, a well drafted sales rep agreement must address a wide array of topics. A skilled legal advisor can help you navigate these issues.

Seth has over 20 years of experience, as an attorney practicing at international law firms and as in-house counsel to an international private equity firm. Seth has advised on, structured and executed commercial transactions throughout North America, Europe, Asia, Africa and South America, both as a legal practitioner as well as an equity and debt holder.
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