Welcome to another episode of Started & legal With Dayna Thomas, Esq., Entrepreneurship Advocate and Legal Coach. Launched & Legal is an Atlanta Small Business Network original series providing entrepreneurs and business owners with the best practices and tips for strategizing, legalizing and monetizing their ventures. Today, Dayna shares five key contracts for entrepreneurs.
If you have any questions or comments about tonight’s show, message Dayna or comment on her on Instagram @daynathomaslaw.
Dayna Thomas, Esq.:
An important aspect of a solid legal basis are contracts. Contracts are essential for protecting the rights and limiting the liability of entrepreneurs. But with so many different types of contracts, how do you even know which ones you actually need? While it’s best to consult an attorney to determine the specific contracting requirements for your business, there are some contracts that are essential for almost every business owner. So in this episode I share five key contracts for entrepreneurs.
First, I’m going to talk about a copyright assignment agreement. A copyright assignment agreement is essential, and it’s actually something I didn’t even know about until I became a lawyer. So I can even imagine that many of you have no idea what that is, especially why it’s on the Essentials list. So, a copyright assignment agreement is a contract that transfers copyright ownership from the creator or copyright owner to the person who will own it.
For example, think of your logo in terms that best describe your business. A logo is protected by copyright. Copyright protects original works of authorship recorded on a tangible medium. Well, that sounds very fancy, but essentially the artwork means it, right? And not necessarily just art that you paint. It could be lettering, it could be a logo. It can be many different forms of art or writing fixed in a tangible medium, meaning it is a tangible form, not just an idea.
The default rule is: Whoever creates it, owns it. So think about your logo. Did you create your logo or hire someone else to do it? Have you asked a friend to create your logo for you? By law, whoever creates that logo owns that logo, and even if you paid them money for it, even if they said, “There you go, you can have it,” you only have a license, an implied license at that to use this logo for your business. It is very important that you retain ownership of all intellectual property rights for your business, including your logo and the copyright to it.
So you need a copyright assignment agreement to transfer ownership of your logo if you didn’t create your logo to you or your company, preferably your company. So, copyright assignment agreements don’t just apply to logos. It can refer to anything that is or may be copyrighted. So that’s number one, a copyright assignment agreement.
The second one I have on the list is a customer service contract. This is for those of you who sell services and not products, which is what a lot of business owners out there are. So if you provide a service to a customer, you must enter into a customer service contract. A customer service contract is essential as it ensures you set expectations for your customers. Nobody wants to have an argument with a customer and we hope for the best. But the reality is that sometimes your visions don’t match, or maybe your thought processes don’t match, and you might disagree. So if a dispute does arise, it’s great to have a customer service agreement so you can always go back to the contract to ensure you can resolve any disputes that arise.
So, some of the most important terms in a customer service contract are the term and the specific services you will provide. Notice I said specifically. We don’t want to generalize. We would like to list the specific benefits that are included. But not only that, the services that are not included can be just as important. The Payment Plan and Pricing, Cancellation. So if the situation doesn’t work, how can you terminate this agreement, fire your customer, or how can your customer fire you? You should ensure this is stated in your contract to avoid unnecessary disputes. So a service contract.
Number three. An independent contractor agreement. I can honestly say that in my time as a lawyer I have drafted more independent contractor contracts than any other contract in existence. It’s because it’s often needed and often used. So, essentially, an independent contractor agreement is a contract that you use when you hire someone to perform services for you. Not an employee but a person you hire to perform services for you, which is distinct from a customer service contract where you perform the services. If you hire someone like a virtual assistant or someone to create marketing content for you, that person will likely be considered an independent contractor and you should have a contract that details what that service will be and their exact duration , pricing.
A key term here is a work-for-hire clause, meaning that any content your independent contractor creates for your business or as part of their service belongs to you or your business, whoever is the party to the contract. This is very important because if you remember, from contract number one onwards, whoever creates the content belongs. So make sure you have an independent contractor agreement in place, especially if that contractor is creating content for you, to include all of these clauses. Employment relationship, termination, length of tenure, all those important details that make up what your relationship will be like.
Number four is an operating agreement. Well, an operating agreement is a contract between the owners of an LLC, a limited liability company, that details how the business will be conducted. A works agreement is no longer required by law. Nowhere do you have to submit your operating agreement. It is an internal document that helps regulate how a limited liability company is run. Well, an operating agreement is very important because almost every state has a law that governs how limited liability companies are run, unless you have an operating agreement that dictates how you run your own business.
In essence, the law respects your operating agreement when making decisions for yourself. But if you don’t have an operating agreement that specifies how your business should be run, then the states have a code of statutes that dictate and rule that for you. So it’s very important, although it’s optional, I would say it’s not even optional if you have a business partner. If you have a business partner, they should really be your top priority in starting and running your business. Nobody wants arguments with business partners, and it really isn’t easy to put a business partner out of business when things aren’t going well.
So it’s best if you start out by essentially coming together, determining how you want to run your business, what are the roles and responsibilities, how you will transfer ownership of your business, and how the business will be terminated if it doesn’t work , and so many other miscellaneous clauses that go into potential running a business. So an operating agreement, although it’s optional if you have a limited company, I’d say it’s super important, especially if you have a business partner and want to dictate how you run your business.
And number five, your website’s terms and conditions. So if you look at almost every website, not every website but many websites if you scroll down you will see a link that often says terms and conditions or conditions of sale. If you click on it, that is an actual contract that you are entering into when you browse or make a purchase on this website. Now, I know it’s not realistic for every single business owner to have a written contract with every person you do business with, especially if you’re selling goods, is it? It is not realistic for every customer who purchases a product from you to physically sign a contract stating the terms of purchase for that product.
So what you can do is have terms and conditions on your website that spell out your policies, your procedures, your return policy, and many different terms for running your business, what content is on your website, where they don’t copy the content lets your site know that it is copyrighted. Sometimes many websites even have links to third party websites. So please disclaim that you do not control or are responsible for what you see or learn from this third party website. Disclaimer of Warranties, Governing Law, which means that if there is ever a dispute with your company, it will be dealt with legally. Because with a website, there can literally be people from all over the world engaging with your business. So it’s important to have applicable law in your terms and conditions to say if a dispute ever arises where you will deal with it.
Again, with terms and conditions, this isn’t a requirement, but it’s excellent to have as you build your business and make sure your contracts are in place. If you even have a way for your users to check a box, click “yes” or “I agree”, it becomes even more enforceable as it shows that you have done your due diligence in enforcing this contract.
So these are the five key contracts for entrepreneurs. Again, this isn’t a complete list of all the contracts you’ll need. I definitely recommend that you consult an attorney to determine what your specific needs are, but this is definitely a good place to start.
Dayna Thomas, Esq.:
Well, I hope that today’s show will help educate and inspire you as you pursue your business goals. Be sure to share tonight’s show with someone who may benefit and visit MyASBN.com and subscribe. If you have any questions or comments about tonight’s show, I’d love to hear from you, message me or comment on Instagram at @daynathomaslaw. Remember to tune in next week and each week to make sure your business is up and running.
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