5 Key Contracts for Entrepreneurs

Welcome to another episode of Launched & Legal with Dayna Thomas, Esq., entrepreneurship attorney and law firm coach. Launched & Legal is an Atlanta Small Business Network original series dedicated to bringing entrepreneurs and business owners the best practices and tips for strategizing, legalizing, and monetizing their ventures. Today, Dayna shares five key contracts for entrepreneurs.

If you have questions or comments about today’s show, send Dayna a message or comment on Instagram @daynathomaslaw.

Transcription:

Dayna Thomas, Esq.:
One important aspect of a solid legal foundation is contracts. Contracts are essential for protecting the rights and limiting the liabilities of entrepreneurs. But with so many different types of contracts out there, how do you even know which ones you actually need? While it’s best to consult with an attorney to determine the specific contract needs for your business, there are some contracts that are essential for almost any business owner. So in this episode, I’m sharing five key contracts for entrepreneurs.

First, I’m going to talk about a copyright assignment agreement. A copyright assignment agreement is essential, and it’s actually something that I didn’t even learn about until I became a lawyer. So I can even imagine many of you who have no idea what that is, especially why it’s on the essentials list. So a copyright assignment agreement is a contract that transfers copyright ownership from the creator or the copyright owner to whoever that person is who’s going to own it.

So for example, and in terms that will speak most to your business, think about your logo. A logo is entitled to copyright protection. Copyright protects original works of authorship that are fixed in a tangible medium. Now, that sounds very fancy, but essentially what that means is work of art, right? And not necessarily just art that you paint. It could be a writing, it can be a logo. It can be many different forms of arts or writing that’s fixed in a tangible medium, meaning it’s in a tangible form, not just an idea.

The default rule is whoever creates it owns it. So think about your logo. Did you create your logo or did you hire someone else to do it? Did you ask a friend to create your logo for you? By law, whoever creates that logo owns that logo, and even if you’ve paid them money for it, even if they’ve said, “Here you go, you can have it,” you only have a license, an implied license at that, to use that logo for your business. It’s very important that you maintain ownership of all of the intellectual property for your business, including your logo and the copyright ownership to that.

So you need a copyright assignment agreement to transfer ownership in your logo if you did not create your logo to you or your business, preferably your business. So copyright assignment agreements don’t only apply to logos. It can apply to anything that is or can be copyright protected. So that’s number one, a copyright assignment agreement.

The second one I have on the list is a client services agreement. This is for those of you who sell services and not products, which are a lot of business owners out there. So if you are providing a service to a client, then you need to have a client services agreement. A client services agreement is essential because it makes sure that you set expectations with your clients. No one wants to have any dispute with a client, and we hope for the best. But the reality is sometimes your visions don’t align, or maybe your thought processes don’t align and maybe you don’t see eye to eye. So if there is a dispute, it’s great to have a client services agreement in place so that you can always go back to the contract to make sure that you can eliminate any disputes that arise.

So some of the key terms in a client services agreement are the length of the term, the specific services that you’re going to offer. Notice that I said specific. We do not want to keep it general. We want to list out the specific services that are included. But not only that, the services that are not included can be just as important. The payment schedule and pricing, termination. So if the situation is not working out, how can you terminate that agreement, fire your client, or how can your client fire you? You want to make sure that it’s laid out in your contract to help avoid unnecessary disputes. So a client services agreement.

Number three. An independent contractor agreement. I can honestly say that as my time as an attorney, I have drafted more independent contractor agreements than any other agreement there is out there. It’s because it is often needed and often used. So an independent contractor agreement is essentially a contract that you use when you hire someone to provide services for you. Not an employee, but a person that you’re hiring to provide services for you, which is different from a client services agreement where you’re providing the services. When you’re hiring someone such as a virtual assistant or someone to create marketing content for you, that person is likely to be considered an independent contractor, and you should have a contract detailing what that service is going to be, specifying it, the length of the term, the pricing.

One important term in that is a work for hire clause, which means that whatever content that your independent contractor creates for your business or as a part of their service is going to be owned by you or your company, whoever is a party to that contract. That is super important because if you remember, from contract number one, whoever creates the content owns it. So be sure to have an independent contractor agreement, especially if that contractor’s going to be creating content for you, to include all of those clauses. Work for hire, termination, length of the term, all of those important details that lays out what your relationship will be like.

Number four is an operating agreement. Now, an operating agreement is a contract between owners of a LLC, a limited liability company, that details how the business will be run. Now, a operating agreement is not required by law. There is nowhere that you need to file your operating agreement. It is an internal document that helps to govern how a limited liability company is going to be run. Now, an operating agreement is very important because in just about every state, there is a body of law that says how limited liability companies will be run unless you have an operating agreement that you dictate how you’ll run your own business.

So essentially, the law will respect your operating agreement if you make decisions for yourself. But if you do not have an operating agreement that says how your business is to be run, then states have a body of law that dictates and decides that for you. So it’s very important, even though it is optional, I would say it’s not even optional really if you have a business partner. If you have a business partner, this really should be top priority for you when you are establishing and running your business. No one wants a dispute with business partners, and it’s really not easy to kick a business partner out of a business if things don’t work out.

So it’s best for you guys to essentially join forces in the beginning, determine how you want to run your business, what the roles and responsibilities are, how do you transfer ownership in your business, how does the business get terminated if it’s not working out, and so many other different clauses that goes into potentially running a business. So an operating agreement, although it’s optional when you have a limited liability company, I would say it’s super important, especially if you have a business partner and you want to make the determination of how to run your business.

And number five, your website terms and conditions. So if you take a look at just about any website, not every website but a lot of websites, if you scroll to the bottom, you will see a link that often says Terms and Conditions or Terms of Sale. If you click that, that’s an actual contract that you’re entering into when you browse that website or when you make a purchase from that website. Now, I know it’s not realistic for every single business owner to have a written contract with every person that you do business with, especially if you sell goods, right? It’s not realistic for every customer that buys a product from you to physically sign a contract about the terms of buying that product.

So what you can do is have a terms and conditions in your website that states out your policies, your procedures, your return policy, and many different terms about running your business, what content is on your website, that they cannot copy the content on your website, that it’s copyright protected. Sometimes on many websites, there are even links to third party websites. So disclaimers that you are not in control or responsible for what they see or learn from that third party website. Disclaimer of warranties, governing law, which means that if there is ever a dispute with your business, where that is going to be handled legally. Because with a website, there can be people from all over the world, literally, that are engaging with your business. So it’s important to have governing law in your terms and conditions to say if there’s ever a dispute where you’re going to handle it.

So with the terms and conditions, again, it is not a requirement, but it’s excellent to have when you are building your business and making sure that you have your contracts in place. If there’s even a way for you to have your users check a box, click yes, or click I agree, that makes it even more enforceable because that shows that you did your due diligence when enforcing that contract.

So those are the five key contracts for entrepreneurs. Again, it is not an exhaustive list of all of the contracts you need. I definitely recommend that you consult with an attorney to determine what your specific needs are, but this is definitely a good place to start.

Dayna Thomas, Esq.:
Well, I hope today’s show help to educate and inspire you as you pursue your business goals. Be sure to share today’s show with someone who can benefit and visit MyASBN.com and subscribe. If you have any questions or comments about today’s show, I would love to hear from you, send me a message or comment on Instagram at @daynathomaslaw. Remember to tune in next week and every week to make sure your business is launched and legal.