Companies enter into contracts during all stages of business. No matter what type of transaction a contract governs, it is critical to review unfavorable terms and confirm that a contract is enforceable under the law. An experienced business lawyer should always draft or review contracts before a business owner signs to ensure the company will not be at risk of any unnecessary liability or losses should something go wrong. The following are some examples of the many contracts used in business today.
Partnership and operating agreements – A partnership or a limited liability company (LLC) should always have a written agreement governing how the company will be operated. An operating agreement (LLC) or partnership agreement outlines the rights and responsibilities of each owner, as well as how to resolve disputes between the owners. Having a thorough agreement will reduce conflict and prevent litigation.
Buy/sell agreements – A buy/sell agreement governs the transfer of an owner’s interest in the company, whether the transfer is voluntary or involuntary. The buy/sell agreement will determine how a transfer of an owner’s interest is handled and will usually provide the remaining owners with the first right to purchase the transferring owner’s interest. A buy/sell agreement will also set out how the value of the ownership interest will be calculated and how the company or owners may pay for the ownership interest.
Leases – Companies often enter into leases for commercial space for the business operations and for any necessary equipment. The wrong lease terms can be costly for a company, so you want to ensure that there are no unfavorable provisions that may result in unforeseen expenses. You also want to include provisions that clearly state your right as the lessee and protect you in the event of a dispute with the lessor.
Employment contracts – If you have employees, you may want them to sign a contract to clarify your employees’ rights and obligations, as well as your rights and obligations as the employer. Employment contracts should have clear terms and should address the duration of the contract, benefits and compensation, grounds for termination, and possibly a non-compete clause. An incomplete or unclear employment contract can expose your company to liability should the employee have complaints down the line.
Non-disclosure agreements (NDAs) – If your operations involve any trade secrets or other types of confidential information, you want anyone with access to this information to sign an NDA or a Confidentiality Agreement. Parties can include employees, independent contractors, suppliers and vendors, service providers, or even prospective buyers of your business.
Purchase agreements – Contracts that govern purchases can be as simple as a receipt or bill of sale for a product, or as complicated as an asset or equity purchase agreement for the sale or purchase of an entire company. Regardless, it is important that the terms are clear to ensure that all parties understand their rights under the agreement and to prevent misunderstandings which could result in litigation over the sale or purchase.
Contracts commonly include difficult languages, and it can be easy to miss important terms that may result in harm to your company down the line. It is always wise to discuss contracts with an experienced business attorney. To discuss our business law services, please email Stephen Welle or call O’Keeffe O’Brien Lyson Foss at 701-235-8000 or toll-free 877-235-8002.