When starting a business and putting things in order, one often overlooked aspect is the legal aspect. Most entrepreneurs ignore this because of its perceived complications and boring language. Despite this, legal documents are important because they help set the tone for how your business will be run. It is always better to go through it at the start rather than have deep regrets down the road.
Here are five of the most important documents you MUST have as a business owner or entrepreneur. These documents are a necessity when starting your company and we will explain why you need each and what you stand to lose by not having them.
1. Confidentiality Agreement.
A confidentiality agreement is a legal document that binds one or more parties and prevents them from disclosing confidential or sensitive information. It is used in situations where sensitive information or proprietary knowledge not available to the general public is to be shared. Examples include Non-Disclosure Agreements and Non-Compete Agreements.
This document is important to you as a business owner because it helps to ensure that your business innovation is not shared with people outside your company. When well couched, it also prevents an employee of yours from immediately going to work with a competitor after leaving your employment. Failure to have this document means that if theft of your business’s confidential information occurs, it may be arduous or almost impossible to take legal action against the perpetrator.
2. Employment contracts.
An employment contract is essential when hiring. You may think an employment contract is a simple enough document but often, important clauses are overlooked during the drafting. For instance, an employment contract should clearly provide for the role and remuneration, job description, sick leave and vacation days, confidentiality clauses, and intellectual property assignment clauses among others.
This ensures that both employer and employee are well protected by the law during the term of the employment.
3. Partnership/ Cofounder Agreement.
These documents have some similarities which I will look at. These agreements outline the ownership structure between the founders or partners in a business, their initial capital and non-capital contribution, duties and responsibilities. It also makes provisions for dispute resolutions.
The difference between a partnership and cofounder agreement is that a cofounder agreement is entered into by the founders or creators of a start or technology business, while a partnership agreement is mostly between partners in a business venture such as a partnership, firm, or fund.
4. Intellectual Property Assignment Agreement
Protecting your intellectual property as an entrepreneur or business owner cannot be over emphasized and this document goes a long way in ensuring that. The Intellectual Property Assignment Agreement can be a standalone document but is also commonly found as a clause in different legal documents.
The reason for its importance is that it ensures that everyone who has any interaction with your confidential information such as making a contribution, alteration or addition towards your business growth cannot claim that work as theirs. This document ensures that ownership in any such work belongs to your business and this right can be enforced in a court of law.
If you are reading this and realize you did not include a clause on IP assignment in previous employment contracts, you can ask them to sign an updated contract or create a different document for IP assignment.
5. Privacy Policies and Terms of Use
These documents are especially relevant if you have an online or digital business where you interact with clients, vendors or customers online. The terms of use outline how users interact with your business, the type of conduct allowed or not allowed, and your method of resolving disputes.
A privacy policy document governs how you collect information from visitors to your digital marketing spaces, events, or promotions. It outlines what you will and will not do with their information.
What next?
Having these documents for your business is simply non-negotiable. Even if you have a business but do not have these documents, today is always a good day to get them.
Legal Trunk offers these legal documents in a simplified format that is easy to read and understand as an entrepreneur or business owner. Get your legal documents here or take our free diagnostic test to review the legal health of your business.
