In order to run a business, contracts and agreements are necessary. Both offer two parties terms that are enforceable under law. While verbal contracts are not always upheld, written business contracts are highly effective in court. To understand common types of contracts, business owners should understand which ones are necessary for their business. Then, they can work on how to write a contract. In this post, we’ll give you the most common business contracts that you will probably use when operating a company.
Business Structure Contracts
First and foremost, companies require a selected structure or entity. You might have already set up your company as a DBA, LLC or Corporation. If you have partners in the business, then the business structure must be laid out in a contract. The articles of incorporation along with the operating agreement serve as a business contract between partners. Typically, these business setup agreements are carefully reviewed and approved by a corporate attorney. When starting a business, or restructuring an existing one, incorporation documents serve are commonly used contracts.
Equipment Lease Contracts
For most businesses, their operations require equipment or materials to satisfy customer demands. Instead of paying for expensive equipment upfront. You can enter a lease agreement. The lease contracts allow business owners to either rent or lease-to-own the equipment necessary for their business. They ensure that the equipment is guaranteed to the business while payment is ensured to the lender. Without of the use of this common business contract, many companies would have significant cash flow and tax implications.
Sales Contracts For Clients
Whether you have a goods or service business, sales contracts protect your business from non-paying customers. Unless your clients are paying upfront, it is in the best interest of your company to have a sales contract in place. With a sales contract, you have more financial leverage because payment is guaranteed to a certain extent. This agreement agreement for the sales of goods details the terms and conditions of the sale. In many cases, the client may also request a bill or sale to ensure that the goods or services will be delivered up to expectations. On both sides, business contracts for sales ensure that the buying and selling parties are on the same page.
As your business grows, you will need employment contracts. When hiring new employees, they need to have a good understanding of what are their duties and responsibilities. Then, they would like to know how they are going to be compensated for the work that they complete. Moreover, they may be looking for other benefits such as healthcare coverage, paid vacation days or managerial autonomy. Your employment agreement serves as a business contract to outline all these important details. In the event of a termination or dismissal, the employment contract can avoid lawsuits or misunderstandings during the process. Certainly, employment contracts are one of the most common types of business contracts because they are necessary to hire quality employees.
To keep sensitive business information confidential, non disclosure agreements are used commonly in the United States and internationally. Known as the NDA or NDA agreement, the business contract ensured the privacy of information between two parties. Some companies have all employees sign this agreement. Others use it for disclosing trade secrets between strategic business partners. They are also used in buying and selling business ideas too. If you have sensitive business data, NDA is one of the most common types of agreements in business.
Thus, business contracts are commonly used documents to protect two parties working together. You can use contracts to establish companies, solidify sales, hire new employees and acquire new equipment. When written properly, contracts and agreements will protect your company from litigation. More so, they hold other parties accountable so that your business can grow and expand successfully.
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