☰ Menu
× Close

Business Contracts 101 For Entrepreneurs & Small Business Owners

Business Contracts 101 For Entrepreneurs & Small Business Owners

Entrepreneurs take their dreams and turn them into their livelihood. For some, it’s their art. For others, it’s their set of skills that makes their clients’ lives easier. There are many different types of entrepreneurs. Some build small businesses that provide for their families. Others turn their dreams into multi-million dollar companies. 

For graphic designers, breaking into the industry can be a challenge. They work hard to hone their craft. Then they find internships and mentors to continue to learn as much as they possibly can. And if they continue to work hard and network, they hope to land major clients that will continuously showcase their work.

One of the biggest challenges for small businesses is avoiding clients who refuse to pay after the service is complete. And unfortunately, it happens in every industry. For one graphic designer, she landed her first big break via a verbal agreement over a phone call. Then, she worked her magic and turned a mock-up design into exactly what the client requested. However, the client said they weren’t impressed. Then, they said they wouldn’t pay. Without a business contract in place, the graphic designer was left feeling hopeless. 

However, in this situation, the client already had the final deliverables of the project. And then the design showed up on their business cards, websites, marketing materials, and more. While they are marketing themselves with the deliverable they claimed wasn’t worth paying for, the graphic designer who spent days working on their project is left without pay.

What You Need To Know About Business Contracts

No one wants their hard work dismissed, only to watch the client use it publicly afterward. 

But this graphic designer doesn’t have the strongest argument to sue for breach of contract based on the verbal agreement over a phone call. A contract would have made the terms of payment clear. 

This is an example of why business contracts are so important. Without putting business-attorney-approved business contracts in place, you may as well be working for free. 

Do you need business contracts in place to protect your business? Reach out to Carson Law today!

What’s The Point Of A Business Contract?

It’s important to realize that an invoice is not a business contract. In fact, it’s nothing more than a bill of sale. 

On the other hand, a good business contract will:

  • Set expectations
  • Cover payment terms
  • Include the process of client feedback and acceptance
  • Will cover repercussions of non-payment
  • And more!

Depending on the type of business, you may also include a portfolio release, copyright transference, and many more details. The point is to have your process of doing business made clear. Furthermore, you are also making it very clear to the client that you have expectations for them, too. 

Business Contracts Are About Setting Expectations 

You didn’t go into business to offer your services for free. So don’t leave room for interpretations!

Business contracts must set expectations for the entirety of the project outlined. Your contract may, but doesn’t have to, include:

  • Your timeline for completion
  • An allotted time for client(s) to review 
  • How you expect clients to provide feedback
  • The number of revisions included in your initial price
  • The cost of further revisions if needed
  • A timeframe in which the client submits payment
  • Actions that you will take if the client fails to pay
  • An agreement to not slander each other 
  • And more!

Make Sure You Get Paid For Your Services

Payment terms are incredibly important when it comes to business contracts. That is unless you are totally fine working for free. But we don’t recommend that for you or your business.

Instead, clearly state your prices. For the hypothetical graphic designer, her business contracts may state that her price includes:

  • Custom graphic design
  • Photoshoot planning and coordination
  • Ongoing market research for new marketing opportunities
  • Reporting and analytics
  • Availability for meetings and phone calls

This makes it simple to understand what the graphic designer provides and at what cost. A good business contract makes sure there are no surprises. If there is an issue with a price point, this is the client’s opportunity to speak up. Discounts may be available when needed. And if they can’t agree on the price, the graphic designers can likely point the client in the right direction.

Protect Your Proprietary Information

It’s common to show off a little bit for prospective clients. After all, you want them to know that you are the authority in your industry. 

However, you don’t want your trade secrets getting out to the competition. One way to avoid this is to include stipulations in the business contract. Furthermore, a good business attorney may include an NDA addendum.

It’s best to avoid sharing proprietary information entirely. But if you do, make sure you speak with your attorney first. After all, will winning this one client’s business be worth your trade secrets reaching your biggest competitor?

Wondering what information is safe to share with prospective clients? Don’t leave your livelihood up to chance. Contact Carson Law to make sure your business is running legally, smoothly, and effectively.

What Makes A Business Contract Legally Binding?

Unless you are an attorney with experience in business contracts, don’t assume what you’re signing is legally binding. You need a good business lawyer with experience in your corner. 

You Have To Be Able To Prove Its Existence

For any contract to be admissible in legal proceedings, you must first be able to prove it exists. This is one of the many reasons verbal handshake agreements are not good for business. 

However, you can use emails and text messages proving the existence of a business contract as evidence. Written documentation is crucial. 

It’s All About The Language

The wording used in business contracts needs to be precise. Don’t leave anything up for interpretation. Because, honestly, most people will choose to interpret your words in a way that benefits them – not you. For instance, consider this dairy company in Maine that lost a $5 million lawsuit over the lack of an oxford comma.

To ensure that you have a good contract, you need a good attorney. Business attorneys can either draft or review your contract(s). What’s most important is you find a business attorney with experience in business law.

Consult A Business Attorney Before Issuing A Business Contract

Remember this mantra: “My business attorney must review all contracts before I send or sign.” Now write that on a bunch of sticky notes. Put one on your computer monitor, bathroom mirror, car dashboard, coffee maker, front door, back door, etc. 

Don’t get caught up in the moment of an exciting phone call and be too quick to agree to something. Most people run into trouble when they agree to terms they don’t understand. A good business attorney will make sure that you fully comprehend the documents you send and receive before anyone signs. 

How Do You Handle Someone Not Upholding Their End Of A Business Contract?

Business owners run into several ups and downs, and that’s normal. What’s important is not to react emotionally. When you have a business attorney on your side, there should already be protocols in place.

Don’t Take Matters Into Your Own Hands

You may have heard in the news about the Colorado contractor who destroyed a bathroom remodel when the client refused to pay. Don’t be like that guy. He may have had the law on his side at first. But he took the matter into his own hands, and in doing so, committed a criminal offense.

The graphic designer wouldn’t hack into her non-paying client’s website to destroy graphics. And she wouldn’t graffiti over billboards made with her work. Don’t turn a wronged business deal into criminal charges against you. Instead, call your business attorney and explore your legal options. 

You Need The Business Attorney Who Knows Business Contracts

You wouldn’t ask a Kindergarten teacher to tutor high school calculus. Kindergarten and calculus teachers each have their own specific skill sets that are invaluable to the education system. But those skills don’t typically overlap.

For the same reason, you don’t want a criminal defense attorney handling your business dealings. What you need is a business attorney with business law experience. Carson Law helps entrepreneurs and small business owners through every phase of their business. From starting on the right foot, ensuring good contracts are in place, handling breach of contract situations, and more, Carson Law will help you prevent costly and time-consuming litigation down the line.

Ready to put your business in the right hands? Contact Carson Law today.