As the New Year approaches, many of us start to think of ways we would like to improve our lives. For some, it’s a plan to make more money, or lose weight. Small business owners, however, should be considering (among other things) ways to improve their operations in the coming year.
Using contracts is, in the legal sense, what preventive medicine is to the medical field-a way to prevent a problem, rather than curing it after the fact. This is extremely important to a small business owner, because dealing with legal problems after the fact, as in medicine, most often leads to higher costs and a less likely chance of a successful outcome.
One of the ways to utilize this mindset is to review your use of contracts in your business and ask yourself:
- What types of contracts am I currently using?
- Am I utilizing contracts in an effectively, i.e., are the provisions in my contracts adequate?
- Are my contracts legally enforceable?
- Have I considered additional ways to incorporate contracts in my business operational plan to protect my business interests?
Getting your agreements in writing is essential to the protection of your business. Although contracts may be used in almost any situation where two or more parties have rights and obligations to one another, contracts are most commonly used by small businesses in certain employment situations, to cover real estate purchases and leases, for the purchase or sale of goods or services, in creditor/debtor relationships, and in marketing or licensing agreements. If you are involved in any of the above in relation to your business, and are not using contracts to define those business relationships, you should consider the risks of not using them, including: the potential for lost business opportunities, litigation (and the related expense), misunderstandings, and uncertainty. Ultimately, you will find that the “benefits” of a small cost savings in not creating the contract and the amount of time it takes to ensure the contract is in place do not outweigh the risks.
What’s more, even if you do have contracts in place, you should be reviewing the ones you consistently use to ensure that the provisions they contain are adequate for your business. If they are not, or circumstances have changed, it’s time for a contract overhaul. Don’t delay this basic maintenance issue-it’s essential to the long-term health of your business!
Author: Nicole Wipp. Nicole Wipp is a practicing attorney and small business owner in Southeast Michigan. She often teaches and lectures on issues of interest to the small business community. From her personal experiences, she works to produce solutions for her clients and others that are legally, practically and economically realistic. You can reach Nicole directly at 248.686.1518. or online at http://www.wipplaw.com
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