According to research carried out by the Babson College Team of the Global Entrepreneurship Monitor, 63% of Americans think that entrepreneurship is a stellar career choice. If you are thinking of starting a business or are looking to expand your established business, you need to know certain types of contracts to operate correctly. Let’s have a look at the most important types of contracts in business.

1. General business contracts

The most basic business contracts you need to be aware of are general business contracts that cover vital topics such as your business structure and how those contracts will protect various stakeholders.

You can create these and other business contracts with the help of FormPros.The essential general business contracts that you need to know are-

a) Indemnity agreement

A contract wherein one person indemnifies or “holds harmless” another party against damages resulting from a specific agreement.

A typical example is a professional dog walking business asking dog owners to put their signature on an indemnity contract to prevent lawsuits if another animal hurts the owners’ dog while they take the dog out for a walk.

Partnership agreement

A contract that businesses use to define the relationship between two or more partners in a business, along with the contributions and obligations of the said partners.

Property and equipment lease

These contracts explicitly mention the terms and conditions for leasing a piece of equipment or a building. They cover deposits, maintenance agreements, terms, monthly payments, and other associated items.

Non-disclosure agreement

A contract that specifies what confidential or proprietary information third parties such as suppliers, vendors, employees, service providers, or independent contractors may or may not share about the business 

2. Employment contracts

If you intend to have employees working in your business, you need to know about employment contracts documenting each aspect of the employer-employee relationship. Standard employment contracts are:

Non-compete agreement

This contract mentions a specific time period for which any ex-employee is legally barred from competing with your business

General employment contract

Every business should have an employment contract that mentions the broad terms of employment, including topics such as compensation, duration of employment, grounds for termination, and employee benefits, to name a few.

Independent contractor agreement

Businesses running in the US need to abide by the federal government’s strict criteria that determine whether a person working for a business is an independent contractor or a de-facto employee.

You could engage individuals to complete a certain project for you or provide a specific service. If that is the case, you should have an independent contractor agreement that specifies the terms and conditions for the service or project.

3. Contracts related to sales

A sales contract is typically a legal agreement covering aspects of how goods, services, or even property are purchased and sold. It also specifies the legal framework a business should use to transfer the titles of sold goods, property, or services. Examples of typical sales contracts are:

Purchase order

A purchase order is a legally binding agreement by the prospective buyer that commits to purchasing items at an agreed cost and specifies the payment terms and delivery date.

Bill of sale

A hybrid legal document that a business should use to transfer the title of a property purchased by a buyer. A bill of sale is also evidence that a legal agreement was reached between the seller and the buyer regarding the sale.

In Summary

Entrepreneurs have to wear many hats while running a business. It always helps to know about the critical types of contract that will come in handy if you intend to start or expand your business.