When you start your new business, your first goal is likely to be to start to trade as soon as possible. Administrative tasks such as drawing up legal agreements are likely to be on the back burner. But putting good legal documentation in place early on is vital for the long term success of your business. Because of their small size, when something goes wrong early on to a start up, it can be far more damaging than when the same thing happens to an established business.
Generally, problems stem from different understandings of what was agreed: a manufacturer might think that a quality standard required is lower than you expect; or a website developer may think the scope of the project is less. Recording your agreement in writing even just the key terms in an email message is essential to prevent confusion. It is hard to dispute terms that have been written down. If they are also signed and dated, then you very likely have a contract that can be enforced. A written document also signals to others that you are seriously in business: trading lawfully and unlikely to take being messed around lightly.
Going further than just writing down the basic terms will benefit you far more. A good legal document is one that considers not just what you expect to happen, but also what happens if events don’t pan out the way you or your counterparty expect. Start ups often have to change plans as the business develops and a thorough agreement can be an important tool to reduce risks and costs. You can also use a document template as a tool during negotiations. A good template will give you ideas as to ways you can strengthen your position commercial and practical points possibly without the other side objecting. There is advantage to being the party that creates the document since you control the initial terms that become the starting point for negotiation.
You should have a written agreement for each relationship, particularly where the relationship is associated with high risk either to the success or failure of your business. Additionally, there are a handful of relationships that are required to be recorded in writing by law mostly to protect others who might be comparatively disadvantaged; for example: employees, consumer customers and tenants.
What you should do is to buy a flexible legal document template, drawn for your type of business, specifically to be edited easily by you. You can easily find good templates that cost a fraction of the hourly rate of a solicitor, yet are up-to-date and full of options. It is worth noting that Start Up Loan recipients are eligible for £250 of documents for free from Net Lawman (www.netlawman.co.uk). The best templates are those drawn in plain English, and that come with plenty of guidance notes and support as to how to edit it for your circumstances. Look for solicitor written templates, and those that have many commercial and practical points that will give you that advantage in negotiations. Some providers also offer document review services that give you peace of mind that you have edited the document correctly.
But whether you choose to use a solicitor or to edit a document template yourself, make sure you have a document in place. Few of your business relationships will run into trouble, but if one does, having a written agreement will save you great amounts of worry, time and money. Like other forms of insurance, you can pay a little or you can pay a lot.