When starting a business, it can be easy to get caught up in mundane day-to-day operations. While these tasks are essential for ensuring the smooth operation of your company, many less obvious factors can impact your success.
Business agreements are essential for laying out exactly what is expected from every party involved in creating and operating your business. A well-written business agreement can protect you from potential pitfalls and help you avoid costly mistakes further down the road.
No matter the size or scope of your business, every legal entity needs specific documents to thrive and succeed.
What Is a Business Agreement?
A business agreement is an important legal document that lays out the terms of your relationship with other parties that work with your company. It can cover many different types of relationships, including those between owners, partners, employees, investors, suppliers, customers, and others.
There are many different types of business agreement documents. The organisational documents cover the basics of how your company is set up, who owns what, and what the financial relationships are. The employment documents cover the specifics of how your company pays and compensates its employees, including benefits, stock plans, and more.
The partnership and joint venture agreements cover the terms of any partnerships or joint ventures. The asset purchase agreement is key for any significant purchase of assets from another business, such as the purchase of another company. Although there are many different types of business agreement documents, they all have the same goal: to clearly outline what is expected from each party involved.
Organisational Documents
There are two main organisational documents that you will want to include in your business agreement: the articles of incorporation and the operating agreement. The articles of incorporation is the document that creates your company.
It is essentially your company’s birth certificate, and it lays out the financial relationships of the company, as well as the roles of each person involved.
The operating agreement is the document that outlines how members of the company should make decisions, and how they should treat one another. The operating agreement is critical for companies with multiple owners, especially if there are no equal ownership shares.
Employment Documents
Employment documents are crucial for any company that employs people. The agreement that you sign with each employee can lay out very specific requirements for their work, as well as their compensation and benefits. The agreement can cover a wide range of topics, including salary, bonuses, equity, stock options, benefits, and even intellectual property ownership. The employee manual is another important document.
It is a document that outlines the expectations of each employee, and what tasks they should be responsible for. It is critical to have this type of document in place even if you have an employment agreement with each employee.
The employee manual can be a great resource for any new employees who join your team, and it can help minimize misunderstandings in the areas that are not specifically outlined in the employment agreement.
Partnerships and Joint Ventures
Great businesses often form partnerships or joint ventures to help operate more efficiently. Partnerships and joint ventures are very similar, but they are set up for different purposes. A partnership is for businesses that are looking for long-term growth potential.
On the other end, a joint venture is for businesses that are looking to quickly complete a project or get a specific task completed. It is critical to clearly outline all of the details of your partnership or joint venture agreement.
This includes how much each partner or member is contributing to the venture, what percentage of ownership each person has, and what happens if one of the partners decides to leave the venture. It is also important to decide how profits and losses will be allocated.
Asset Purchase Agreement
An asset purchase agreement is a document that outlines the terms of any significant purchase of assets of another company. This can be either a company that you acquire or a company that acquires your company.
An asset purchase agreement is critical for any purchase of significant assets, such as the purchase of a new piece of equipment for your company, or the purchase of another company. It can be helpful to think of the asset purchase agreement as a bill of sale, but for businesses.
It is critical to have this document in place, as it can protect you from potential issues down the road, such as a dispute over who owns what. It is especially important to have an asset purchase agreement in place for any company acquisitions.
Conclusion
Business agreements are an often-overlooked aspect of starting and operating a business. While there are many details to consider, with a little bit of planning and some help from your lawyer, these documents can be very straightforward to create.
The most important thing to remember is that every business agreement is different. You can’t apply a “one-size-fits-all” business agreement to all situations. Instead, each type of business agreement document needs to be tailored to the specific situation and parties involved.
