Documents play an essential role in protecting the interests of a business and the business owners over the course of a company's lifetime. Tackling your legal needs can seem like a daunting task, but it doesn't have to be. It's often wiser to start protecting your business at the very start and not leave it until it's too late. There are a number of key legal documents that are essential for business success.
In the excitement of setting up a business, it's natural to want to share your ideas with family and friends. But remember, once an idea is out there, it can't be drawn back in. If you are working with potential business partners and will share your business ideas with them, ask them to sign a Confidentiality Agreement (also known as a Non-disclosure Agreement or NDA), under which they are legally bound not to disclose your confidential information to a third party, and may only use that information for a specified reason.
Shareholders' Agreement or Partnership Agreement
A Shareholders' Agreement is an agreement between the shareholders of a company and sets out a number of key rules as to how the business will be run, ensuring that the shareholders cooperate and there is continuity throughout the life of the company. This document should cover who the shareholders are, their rights and responsibilities, and what will happen if and when they decide to leave the company. If you operate under a business partnership, make sure you have a Partnership Agreement in place that sets out how decisions are made and profits (and liabilities) are shared.
An employment relationship should be documented right from the outset. An Employment Contract sets out the obligations and expectations of both the company and the employee in order to minimise potential disputes. An Employment Contract should cover key areas such as probation period, pay, benefits, hours, annual leave, and termination.
These two documents are key even if you are not selling goods or services online.
Purchase Order, Invoice, and First Payment Reminder Letter
Good cash flow is essential for a healthy business. Clearly set out payment terms in a Purchase Order when you start to engage customers. Issue Invoices on time and keep track of all payment related documents as these will be critical when chasing up debts. Make sure you understand how to deal with late payments and follow the right procedures to collect your money. If a customer is late in paying your invoice, send a formal First Payment Reminder Letter. It can prompt a customer to pay the overdue invoice so you stay on top of your cash flow.