Key Takeaways

  • Startups and new businesses need a range of contracts to protect ownership, relationships, and assets.
  • Beyond partnership, nondisclosure, and service agreements, founders should also consider employment contracts, shareholder/operating agreements, buy-sell agreements, IP assignment agreements, website terms and conditions, and insurance-related documents.
  • Customer and vendor agreements help define expectations, payment terms, and remedies for disputes.
  • Independent contractors and freelancers require tailored contracts that differ from employee agreements.
  • Proper contracts reduce legal risk, prevent disputes, and clarify responsibilities from the beginning.

Some of the contracts needed to start a business might include:

  • Partnership agreement, which is when two or more individuals work to form a partnership instead of a company.
  • Nondisclosure agreement, which keeps secret aspects of your business safe by limiting how much employees can share or make public.
  • Shareholder's agreement, which defines how shares will be distributed and what rights shareholders will have.
  • Service agreements, which define the duties and obligations of you as an employer and of any employees you hire.
  • Business plans, which help you attract investors to provide the capital that you need to get off the ground.
  • LLC operating agreement, which allows you to create an LLC for benefits that partnerships or sole proprietors don't have.
  • Buy/sell agreement, which is essential for keeping things running smoothly if issues arise between a business and its owners.
  • Employment agreement, which is a contract you'll create for anyone you hire to work for you.
  • Administrative arrangements, which can include insurance and indemnity policies for the directors of the company, as well as provisions for employees.
  • Intellectual property assignment agreement, which lets you take ownership of intellectual property directly from another person.
  • Terms and conditions/privacy policy, which outlines common legal notifications if you plan on operating a website and supplying goods or services.

More on Partnership Agreements

The reason you should create a partnership agreement is so you'll have a documented guide on how you and your partner will run the business. A partnership agreement outlines how you will share profits, costs, and other assets by clearly listing the responsibilities of each party. Even if you trust your partner with your life, partnership agreements eliminate troublesome disagreements before they can begin.

When creating your partnership agreement, be sure to include:

  • How you will make decisions and vote on important issues.
  • How you will distribute losses and profits, including any necessary financial contributions.
  • How you will withdraw or dissolve in the event that one or both partners wish to leave the business. This should also outline how to divide profits after one party has left the business.
  • The roles and responsibilities of each partner, including time commitments.

Shareholder and Operating Agreements

When forming a corporation or an LLC, owners should adopt a shareholder agreement (for corporations) or an operating agreement (for LLCs). These contracts outline voting rights, management responsibilities, and rules for transferring ownership interests. They also protect minority owners by clarifying dividend rights and decision-making processes. Without these agreements, state default laws may dictate outcomes that do not reflect the owners’ intentions

More on Nondisclosure Agreements

To keep your business safe, always make your employees sign a confidentiality agreement so they understand what they are and aren't allowed to share with others. Information you might want to keep secret could include things like:

  • Your marketing plan.
  • Your business plan.
  • Code written for your website or app.
  • Financial forecasts.
  • Customer and client lists.

For example, when you're hiring a freelancer for a specific marketing project, you'll probably want to make this person sign a nondisclosure agreement before sharing intimate details about your company. If you don't, the freelancer could use this information to gain a competitive advantage with another company.

You have the right to sue any employee who breaks a nondisclosure agreement for damages that happened because of their actions.

Intellectual Property Assignment Agreements

Startups often rely on unique products, branding, or creative works. An intellectual property (IP) assignment agreement ensures that inventions, trademarks, software code, or creative materials developed by employees, contractors, or founders are legally owned by the company. This is especially critical when seeking investors, who want assurance that all IP resides with the business and not with individuals.

More on Service Agreements

Make sure that when you craft a service agreement, it has the following information:

  • The duties and job title of the employee you are hiring.
  • The date the employee will start working, and if applicable, the end date.
  • How much you will pay the employee, and if you will provide any benefits.
  • The hours and days the employee will work, including any agreed-upon vacations or public holidays.
  • The vesting schedule for shares if you plan on offering this. Shares are a good way to reward employees after they've been with your company for a set amount of time.
  • A statement guaranteeing confidentiality of information and intellectual property.

Hiring a contractor or freelancer works a little differently. The above agreements will not apply to them because they are not employees. Instead, you should create a different agreement to help guide your working relationship. This agreement should include:

  • How the freelancer will invoice you and how you will pay.
  • Any specific items the contractor is delivering as well as the timeline for these items.
  • A note indicating that the freelancer must pay his own taxes.
  • A final reminder that the contractor is not an employee and does not have the same rights as one.

Customer and Vendor Agreements

Customer contracts and vendor agreements define the terms under which your business provides or receives products and services. Key elements include:

  • Scope of goods or services delivered.
  • Pricing, invoicing, and payment terms.
  • Warranties, liability limitations, and indemnification clauses.
  • Procedures for handling disputes or termination.

These agreements protect cash flow and clarify expectations, helping avoid misunderstandings that could damage relationships or revenue.

Employment and Independent Contractor Agreements

Hiring staff or engaging freelancers requires carefully drafted agreements. Employment contracts typically address compensation, benefits, working hours, termination, and confidentiality. Independent contractor agreements, on the other hand, emphasize deliverables, payment schedules, tax responsibilities, and intellectual property ownership. Misclassifying workers can lead to legal and tax issues, so it’s essential to distinguish between the two and document accordingly.

Website Terms and Privacy Policies

For businesses operating online, website terms and conditions and privacy policies are essential. Terms of service govern how customers use your platform, while privacy policies disclose how you collect, store, and use personal information. These documents are often legally required and help build trust with your clients by demonstrating transparency and compliance with data protection laws.

Insurance and Risk Management Contracts

In addition to traditional agreements, businesses should consider contracts that protect against risk. These include insurance policies for general liability, directors’ and officers’ liability, and professional indemnity. Having the right coverage in place can safeguard your business against unexpected claims, lawsuits, or accidents

Frequently Asked Questions

  1. What are the most important contracts to start business operations?
    Partnership or operating agreements, service agreements, employment/contractor contracts, IP assignments, and customer/vendor agreements are among the most essential.
  2. Do I need a contract even if I trust my business partner?
    Yes. Written contracts clarify expectations and prevent disputes by documenting profit-sharing, responsibilities, and exit procedures.
  3. How do IP assignment agreements help startups?
    They ensure all intellectual property created by employees, founders, or contractors legally belongs to the business, not individuals.
  4. What’s the difference between an employment contract and an independent contractor agreement?
    Employment contracts cover wages, benefits, and employee protections, while contractor agreements focus on project-based deliverables and clarify that the contractor is not an employee.
  5. Are website terms and privacy policies legally required?
    In many jurisdictions, yes—especially if your business collects personal data. They also protect your business from disputes with customers over site usage.

If you need help with the contracts needed to start a business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.