As a small business, you can’t afford to take any missteps. There is a reason that big businesses all use contracts when conducting business, employing people, commissioning work, and so much more. 

Contracts are one of the most important things you can use to protect your business. Depending on your business setup, you risk losing more than just your business assets; you risk your home, personal finance, and more. 

More than a few businesses and freelancers have had a verbal ‘agreement,’ and the company backed out. And most of the time, some of the work has been completed, materials purchased, and other preparations have been made too. It is easy to think that couldn’t happen to you without written contracts – it can happen to anyone. 

So here are just a couple of reasons you need to have contracts: 

Proof of details 

Imagine that a big company asks you to create work in red and at 500 pieces. You do that, but the agreement was verbal, and when you deliver the work – they say hey, I said green. What are you going to do? 

Written contracts clarify every detail or agreement, date, time, cost, and more. 

In the event of a dispute, you have proof of your claim, and that makes it easier to take it to a commercial litigation law firm.

Protection

No one wants to go to court; no one wants to have legal action taken against them – and when you have a contract, you have an extra layer of protection. It’s not just outside sources that you may need protection against. If a business partner has contributed a lot in terms of finance and expects certain things back, a contract will tell them what they are and are not entitled to. 

It will cover ownership of IP, shares, dividends, and more. 

Contracts of this will also cover what happens if the business should fail. 

Enforceability 

Plenty of companies have been burned by handshake or verbal agreements, and in some cases, a written contract is the only way to have these enforced. Some examples are agreements to pay debts, real estate leases for a year or more, property sales, and certain goods. 

Confidentiality 

Perhaps one of the biggest benefits of contracts is that they allow the inclusion of confidentiality. By utilizing this, ensure that your work, discussions, costs, and more are private. Often freelancers will be asked to sign an NDA, but these can be used across many industries. 

With this type of contract in place, you can take action if the information is leaked. 

Clarity

When there are big projects on the table with a lot of moving parts, contracts can clarify the responsibilities of the parties involved. During long meetings, the details like responsibilities, delivery dates, money management, and more may come up – and a contract will keep those details in good order. 

Contracts, while they might seem ‘too much’ in terms of formality for freelancers and small businesses, are one of the things that can keep you and your work safe. If you are just starting to dip your toe into the business world, contracts are a must, but here is some more inspiration: How to Decide What Kind of Business To Start | Branden Bodendorfer – Key2Success