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Is your business contract protecting you?

Making the decision to start a business is an exciting time for many people. It is common to get excited about getting started on your dream and possibly sever ties with a traditional boss for good. But starting a business doesn't mean an end to following rules. In fact, there is a whole new set that come into play.

As one of the owners or executives of your business, it is up to you to figure out what those rules need to be, and how to enforce them. You also need to protect yourself against potential lawsuits, and plan for the unexpected so that you make it through inevitable bumps in the road that are common to start up businesses.

How can you do this? By developing your business plan around solid contracts that will give you the commitments you need from everyone involved. Here are some of the various elements that deserve your attention and may improve your chances at success.

Start with a prenup

Starting a business is not unlike starting a marriage, and no matter how optimistic everyone seems at the start, breakups and betrayals happen. While it is no fun to think about everything that might go wrong, doing so can help protect the interests of all partners involved and offer a layer of protection if someone gets cold feet somewhere in the process.

Identify your contract needs

Business agreements rarely involve a single sheet of paper. Contracts need to be written up between business partners, employees, major investors, and landlords who will be renting leasing space for the business. It is important to look closely at your resources in order to prevent yourself from getting in over your head - such as committing to an extra long lease for a business that doesn't stay afloat.

You may want to make restrictions regarding adding new partners or investors, or evaluate what types of risks employees take on by working with your company. A good lawyer can help you identify what these needs are as they apply to your specific business so that you can start off as confident as possible.

Create a solid vesting agreement

If your company is a corporation, there's a good chance that you'll want to look into getting help from investors that will help you keep you company financed. At the same time, you want to protect your original idea for your business and keep control of your business. A solid vesting agreement will help you organize the shares in your company and identify who is permitted to buy them and in what quantities.

Protecting intellectual property

While a start up might not have a lot of cash value in the beginning, the ideas you get as your business grows can become highly valuable assets. As your information files expand, they become more vulnerable to misuse and may even be used against you if they get into the wrong hands. You need to decide who has access to privileged information, and make sure that they are fully committed to keeping that information inside the company, and disclosing it only when it is necessary. It is important to set clear boundaries in the beginning in order to prevent catastrophes later on.

Be careful what you sign

If you are starting a business, it is likely because you believe in yourself and your abilities. You have a unique idea that can make a real contribution to the business world. While you may be able to download some basic business contracts, there is a very real possibility that some of the fine print in those contracts may eventually be able to be used against you.

The contracts you sign in the beginning and along the way contribute to the foundation as well as the walls of your business, allowing cracks can cause your dreams to crumble in many cases. In most cases, it is well worth the extra investment to sort out your contracts with an attorney to make sure you are getting things right from the start.

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