10 Types of Contracts Your Small Business Might Need

Running a small business can be exciting, but it also comes with its fair share of challenges. One of the most important ways to protect your business and ensure smooth operations is by having the right contracts in place. Contracts are not just paperwork; they’re legal tools that define relationships, set expectations, and safeguard your interests. Whether you're working with clients, vendors, employees, or business partners, having well-drafted agreements can save you from misunderstandings, disputes, and even lawsuits.

Let’s take a look at some common contracts every small business owner should know.

1. Operating Agreement

If your business is an LLC (Limited Liability Company), an operating agreement is a must-have. This contract outlines how your LLC will be managed, the relationship between members, how profits and losses will be distributed, and what happens if a member decides to leave the business. Even if you’re a single-member LLC, having an operating agreement adds legitimacy to your business and protects your limited liability status.

2. Service/Sales Agreement

If your business provides services—whether it’s consulting, design, or anything else—a service agreement is essential. This contract clearly defines the scope of work, deadlines, payment terms, and other expectations between you and your clients. A good service agreement can prevent scope creep (when clients demand extra work outside the agreed-upon terms) and ensure you get paid on time.

Some examples of fields where service agreements would be used are software development, construction, and professional services such as law and accounting.

3. Independent Contractor Agreement

To stay lean and avoid taking on too much payroll, small businesses often rely on independent contractors for tasks like marketing, web development, or bookkeeping. An independent contractor agreement sets the terms of the working relationship, including payment, deadlines, confidentiality, and ownership of work. It also helps clarify that the contractor is not an employee, which is crucial for tax and benefits purposes.

Furthermore, for tasks involving creation or use of a small business's intellectual property, an independent contractor agreement establishes and clarifies who owns the intellectual property being created, and whether there is any license granted. For example, a web designer would typically create a website and convey ownership of the site to the client. However, the contract might include a license back for limited purposes of the web designer using the site as part of its portfolio for marketing purposes.

4. Employment Agreement

If you’re hiring employees, you’ll need an employment agreement to outline the terms of their role. This includes their job description, salary, benefits, work hours, confidentiality obligations, and termination conditions. Having a clear agreement helps manage employee expectations and protects your business in case of disputes. This can also take shape in the form of an employee handbook, which all employees are required to sign. As your workforce grows, it becomes increasingly important to formalize and clarify the relationship between management and labor.

5. Non-Disclosure Agreement (NDA)

An NDA is essential when sharing sensitive information with employees, contractors, business partners, and investors. It ensures that proprietary information like trade secrets, client lists, financial information or product ideas stays confidential.

6. Vendor/Supply Agreement

If you’re working with vendors or suppliers, a vendor agreement outlines the terms of the relationship. This includes pricing, delivery schedules, quality standards, and consequences for breaches of contract. These agreements can also include mandatory purchasing amounts. Vendor agreements help ensure you get what you’re paying for and protect you from unreliable suppliers.

7. Lease Agreement

If your business operates out of a physical space, a lease agreement is a must. This contract spells out the terms of your rental, including rent amount, lease duration, permitted use of the property, and maintenance responsibilities. A solid lease agreement protects your rights as a tenant and helps avoid disputes with your landlord. In many scenarios, tenants have limited bargaining power. However, it is always good to know what is in your lease agreement.

8. Sales Agreement

If your business sells products, a sales agreement ensures that both you and your customers are clear on the terms of the sale. This contract typically includes product descriptions and specifications, pricing, delivery terms, who bears the risk if something happens to the goods in transit, and return policies.

9. Partnership Agreement

If you’re starting a business with one or more partners, a partnership agreement is critical. This contract outlines each partner’s roles, responsibilities, and ownership stakes, as well as how profits, losses, and decision-making will be handled.

10. Intellectual Property (IP) Agreement

For businesses that create original content, products, or designs, an IP agreement ensures you retain ownership of your intellectual property. This is especially important when working with employees or contractors who might contribute to creating IP for your business.

Why Contracts Matter

Having these contracts in place isn’t just about avoiding disputes; it’s about setting a solid foundation for your business. Clear, well-drafted agreements:

• Define expectations and responsibilities for all parties involved.
• Protect your business from legal and financial risks.
• Build trust and professionalism with clients, employees, and partners.

While templates can be a good starting point, it’s always a smart idea to work with an experienced attorney to ensure your contracts are tailored to your business’s unique needs, comply with local laws, and mitigate against risks that are specific to the relationship being established.

As a small business owner, you wear many hats. Having the right contracts in place allows you to minimize risks while focusing on what you do best—growing your business Think of your agreements as a form of safety net, giving you peace of mind and confidence to navigate the business world.

If you’re unsure where to start or need help drafting any of these contracts, reach out to a qualified attorney. Your business’s success and protection are worth the investment.