Essential contracts every small business should have

Contracts do more than protect your business if something goes wrong. They help set clear expectations, reduce misunderstandings, and build stronger relationships with clients, vendors, employees, and contractors.

While every business has unique legal needs, most small businesses benefit from having a few key agreements in place before problems arise.

Why contracts matter

Many business owners wait until there's a dispute before thinking about contracts. By then, it's often too late.

Well-drafted agreements can help clarify responsibilities, establish payment terms, protect confidential information, and reduce the risk of costly legal disputes.

As your business grows, your contracts should grow with it.

Client agreements

If you provide products or services, a written client agreement is one of the most important documents your business can have.

A client agreement typically addresses topics such as:

• Scope of work
• Payment terms
• Project timelines
• Ownership of work product
• Cancellation policies
• Dispute resolution

Having expectations in writing helps both you and your clients understand your respective responsibilities from the start.

Independent contractor agreements

Many small businesses rely on freelancers, consultants, and other independent contractors.

A written agreement can help define the working relationship, payment terms, ownership of work product, confidentiality obligations, and other important business terms.

Keep in mind that simply calling someone an "independent contractor" does not determine their legal classification. Federal and state laws — including those in New York and California — have rules governing worker classification.

Non-disclosure agreements (NDAs)

If you share confidential business information with employees, contractors, vendors, or potential business partners, a non-disclosure agreement (NDA) may help protect sensitive information.

Depending on your business, confidential information might include:

• Customer lists
• Business strategies
• Financial information
• Product designs
• Proprietary processes
• Trade secrets

An NDA is one tool businesses use to help safeguard valuable information.

Website terms and conditions

If your business has a website, terms and conditions can help establish the rules for using your site.

Depending on your business, website terms may address topics such as:

• Acceptable use
• Intellectual property
• Disclaimers
• Limitation of liability
• Online purchases
• User-generated content

Website terms won't eliminate legal risk, but they can be an important part of your overall legal strategy.

Privacy policies

Many businesses collect personal information through their websites, even if it's just a contact form or email signup.

Privacy laws continue to evolve, particularly in states such as California, which has some of the nation's most comprehensive consumer privacy laws. Depending on where your customers are located and what information you collect, you may be legally required to have a privacy policy.

A clear privacy policy also helps build trust by explaining how customer information is collected, used, and protected.

Common contract mistakes

Many small businesses unintentionally create legal risk by:

• Operating without written agreements.
• Downloading generic contracts from the internet.
• Reusing contracts that don't fit their business.
• Failing to update agreements as the business grows.
• Assuming verbal agreements provide enough protection.
• Overlooking website terms and privacy requirements.

Reviewing your contracts periodically can help ensure they continue to meet your business's needs.

Questions we hear from small business owners

Every business is different, and the contracts you need depend on your products, services, customers, and growth plans.

Business owners frequently ask us:

• Which contracts should I have before launching my business?
• Can I use a free contract I found online?
• What's the difference between an employee agreement and an independent contractor agreement?
• Do I really need an NDA?
• Does my website need terms and conditions?
• Am I legally required to have a privacy policy?
• When should I have an attorney review my contracts?

If you're asking these questions, you're already taking an important step toward protecting your business — and a volunteer attorney can help you answer them, at no cost.