Essential Business Contracts for Small Businesses

The pandemic put many confines on small businesses that stunted growth and even delayed the start up of some. Now that businesses are reaching more normal levels of operation, the opportunity has come back to be able to start up business again that was stopped by COVID.

Although there are many important aspects of starting a business, like marketing and maximizing profit, it is also imperative that you have the essential business contracts to make sure your business is legally protected. 

Here are some foundational contracts you should be sure to have for your business:

This agreement lays out the ownership framework, rights and responsibilities of the members and managers who run an LLC. Typical Operating Agreements include:

• Rules and regulations for the business

• Ownership stakes and profit-sharing

• Information regarding adding and removing owners of the LLC

• How financial decisions are made

This agreement defines financial and functional decision-making, which makes it a key document for an LLC. Here are some scenarios of when and how to use an LLC Operating Agreement:

• Create an LLC Operating Agreement when forming the business and deciding who is getting an ownership stake.

• Get buy-in from all members and managers and have them sign the agreement.

• Ensure that any new members with an ownership stake understand and sign the agreement.

• As time goes on, amend the agreement as needed and verify that it is agreed to by all owners.

Non-Compete Agreement

A non-compete agreement is created to hold certain restrictions on business employees and contractors. These restrictions are held in place to prevent someone from partaking in activities that would be in competition with your business or could take clients away from your business. These agreements greatly help protect your business interests. 

Employment Agreement

An employment agreement lays out the terms and conditions that employees are expected to follow when working for your business. Some areas these agreements cover and include are:

• Compensation – Salary and benefits

• Hours – Time that employees are expected to work

• Standards – Expectations employees are expected to meet

• Rules and Regulations – Put within the contract or refers to the employee handbook



• Reviews, opportunities, and disciplinary practices

It is important to know that the details, legality and enforcement of employment agreements can vary by state.

Employment Offer Letter

This letter is a formal means to offer a job to a candidate. It typically includes:

• Start date and time
• Position they are being hired for
• Details of compensation and benefits
• Where they report to

• Link to a full employment contract

Employee Termination Letter

This letter is a formal notice that tells an employee that they are being terminated. It typically includes:

• Date that the termination the applies from

• Position they are being terminated from

• Reason for their termination



• Details of any severance package

Sales Agreement

This agreement formalizes the exchange of goods and services for money. They are often used in business-to-business transactions to verify the product and/or service provided, the amount paid, and any additional considerations.

Partnership Agreement

This agreement functions similarly to an LLC Operating Agreement; it establishes the relationship between business partners and how the business is run. It details the ownership framework, rights and responsibilities of the partners that are involved in the business. They typically include:

• How financial decisions are made

• Information regarding adding and removing partners

• Stakes in ownership and profit-sharing



• Rules and regulations for the business

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