Developing contracts is a large part of running your business. You may develop contracts with suppliers, service providers and your customers on a regular basis.
According to the Small Business Administration, there were 30.7 million small businesses in the U.S. in 2019. If you run one of these small businesses, knowing how to create enforceable, binding business contracts is an important aspect of maintaining your operations.
1. Put agreements in writing
Oral agreements are not always enforceable or legally binding in a court of law. Err on the side of caution by putting all of your business agreements into a written document.
2. Keep terms simple
You do not need a significant amount of legal jargon to make a business contract enforceable. Instead, make sure you include clear terms and use direct language throughout every contract you develop.
3. Talk to the right person
Streamline contract negotiations by talking to the right person from the start. For example, working with a junior person within the organization instead of the head of the operation can result in miscommunication and delays developing the contract. Before you begin, double check that you talk to someone who has the authority to create an agreement and follow through on its terms.
4. Identify everyone correctly
Make your business agreements enforceable by naming everyone in the contract correctly. Outline who is responsible for what obligations and that you include the full official title of any entities, including your business, involved. For instance, include the “LLC” or “Inc.” in your business name within your contract.
An incomplete business contract can leave your business in an insecure position. Taking steps to carefully set up your business relationship from the onset can help to prevent legal disputes down the road.