Millions of people are taking the leap to start their own business every year. Whether a solopreneur or part of a skilled start up team – new business owners are busy. Starting a business may start with a dream but businesses succeed with hard work, determination, and the drive to forge ahead. Many people, after starting a company, realizing the amount of time it takes find themselves overwhelmed and unable to do it all. While they create marketing strategies, business proposals, focus on product development and client acquisition – contracts are being made and signed that due to a lack of time or review can hurt the company and its directors in the long run.
I am not a lawyer and want to disclose that I am not attempting to offer legal advice. This is simply a perspective from one entrepreneur to the next. Speaking from personal experience – it is easy for an entrepreneur with a “go getter” attitude to run ahead without “sweating the small stuff” but it is the small stuff that will often come back to bite you. For this reason I highly recommend that every business hire a corporate attorney from the moment of their formation. Over the course of my career I have worked with excellent attorneys that have saved me a great deal of money and heartache down the road. I also understand that sometimes this is not financially possible. If that is the case – educate yourself and do your best to review every contract you enter into.
Here are some things to consider when reviewing contracts for your business.
- Is the contract in the business name or yours? Registering your business with the state offers you various levels of protection based on state law. All contracts should be in the companies name – not yours.
- Review the signature block. Your company title should always be next to your name (for example Mary, CEO of XYZ Company or Mary, Member of XYZ LLC).
- What protections do you have? If the market shifts does your contract allow for you to shift with it or will you be stuck?
- What happens if the other party doesn’t follow through? You need to have contract language that clearly states what will happen if the other party or your company is unable to fulfill what was promised.
- Confidentiality. Both parties typically have trade secrets and it is important when entering into a business relationship that you are confident in your ability to conduct business without fear of your information being stolen. Confidentiality clauses should describe what type of information cannot be shared and what will happen if it is.
- Jurisdiction. What state laws will govern the contract? This is especially important when dealing with companies or individuals that are located in a different state then you.
These are some of the many things to look for when reviewing contracts. Paying attention now may save you time and money later on. While most people and companies enter into contracts with good intentions business relationships fall apart for a variety of reasons – which is why contracts are so important. The Stroble Law Firm list out additional contracts on their sites that require a close review. Among them are vendor contracts, distributor agreements, employee contracts and real estate contracts.
As an entrepreneur I have worn many hats. At times I have had multiple start-ups going at once while sitting on boards and taking care of my children. While I have always tried to be Super Woman I have learned over time that in order for me to be Super Woman I need to have a team that can support me and the companies I am building . It can be hard to manage everything and run ahead while worrying about reviewing every contract. If you do not have the time or inclination – that is okay. Just make sure someone on your team does.
Bethany Wood
Bethany Wood is a serial entrepreneur and has started several successful companies in a variety of fields including manufacturing, distribution, consumer goods, financial services, marketing and consulting. She is currently the President of SEI International and has business interest in the US, India and China. As an entrepreneur Bethany is constantly finding opportunities to expand SEI’s holdings and as a business owner she is continually learning new ways to improve business performance. As a writer Bethany contributed to and edited the Back to Basics management book.
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