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The Biggest Mistake Business Owners Make When Signing Contracts

The Biggest Mistake Business Owners Make When Signing Contracts

As a business owner, there are a lot of things that you just don’t know. 

Many of us didn’t go to business school or major in entrepreneurship and even if you did, there’s a good chance that you still didn't learn all of the delicate intricacies of running a business. 

And that’s okay! You don’t have to know everything.

But there are some key things to know when running a business that can keep you out of major legal trouble and keep you doing the thing you love most – which probably doesn’t involve talking to the IRS on the phone for hours, filing legal documents, or doing legal research.

At The Boutique Lawyer, our job is to do that sometimes boring or scary work for you and make it fun and easy for you to learn, so you can show up as the #boss that you’re meant to be. 💅🏼

On the blog, you’ll find various resources on various topics that removes the legalese and makes it easy for you to understand exactly what you need to know. 

Not only do we make the learning easy, but we also make it easy for you to implement. 

Because there’s nothing worse than knowing what to do, but then being left wondering HOW to do it. So, we’ve got you covered on both ends.

Through the blog, free resources, learning opportunities, and an ongoing membership, you don’t have to scour the internet to find what you need when it comes to the legalities of your business – instead, it’s all in one place!

In this blog specifically, we’re talking contracts, but not in the sense that you might be thinking… 

As a business owner, you probably already know that you need contracts to present to clients in your business. 

But on the flipside of that, YOU will also be signing contracts as a business owner as you enter relationships with contractors and service providers for various needs. 

THAT is what we’re going to dive into, so that your business is fully protected!

What To Look For When Signing Contracts With Service Providers

As a business owner myself, I’m a big fan of working with contractors and service providers to fill various needs in my business.

After all, you are only one person and as much as you might think you can, there comes a time where you realize that doing it all by yourself really isn’t feasible.

When you decide it’s finally time to work with a service provider for your business needs, it’s important to first seek someone that you trust to not only do the work well, but also have your best interest at heart. 

While you of course want to believe that anyone will, when money is involved you never know what someone might try!

It’s for this reason that regardless of who you decide to work with (I don't care if it’s your sister-in-law or someone you’ve never met before), you want to make sure that they provide a well-crafted and legally sound contract that you will sign and enter into to protect yourself. 

But here’s the most important part: DON’T ENTER A CONTRACT BLINDLY! 🫣

I know we’ve all signed something we don't understand before… it’s okay, you can admit it, I won’t judge you.

And while that might be okay when you sign a waiver at the local trampoline park for your kids to play on a Saturday morning, it’s NOT okay when your business (and potentially) personal assets get involved. 

We’ll touch on that in just a minute, but for now, I want to make sure you understand what exactly to look for when reviewing contracts with service providers for your business:

  • Scope of Work

  • First things first, you want to ensure the contract specifies the services that will be provided, including deliverables, timelines, and any specific requirements needed from you to get this work accomplished in a timely manner

  • Terms and Conditions 

  • What’s the payment structure and when are payments due? What about the cancellation policy? What’s the communication protocol throughout the agreement? Who retains ownership of the work created during the contract terms?

    These are all things you should look for in the Terms and Conditions section of a contract before you sign, so that you aren’t caught off guard at any time.

  • Confidentiality and Indemnification

  • When entering into a working relationship with a contractor, you want to ensure that they have a confidentiality or non-disclosure agreement to protect sensitive business information that they may gain access to during the course of the contract. 

    Additionally, it’s important that your contractor directly addresses each party's responsibilities in case of legal claims or liabilities arising from the work performed.

  • Quality Assurance

  • When hiring in your business, one reason it can feel scary is because you want to know that the work being done is being done well and it can often feel like you are the only one capable of that. 

    While this concern is TOTALLY valid, it’s important to know that your contract can specify quality standards or project milestones that must be met for payment to be released.

    This provides an avenue for you to hold the contractor accountable for the quality of work and make sure that it meets your standards before ever being presented to your audience!

    This alone can give you a TON of peace of mind when it comes to outsourcing in your business.

    The Biggest Mistake To AVOID When Signing Contracts 

    Now that you know what exactly to look for before signing a contract, I want to make sure you know what to AVOID. 

    Aside from never signing something you don’t understand or never signing a partial or incomplete contract, the biggest mistake you want to avoid when signing contracts is signing as yourself, personally. 

    As a business owner, you wear two hats (well, you actually wear manyyyy more than that, but for the sake of this blog, let’s pretend you wear two) – business owner you and regular you. 🧢

    Regular you is the person you are when you're not working. This is the person in line at carpool, taking your kids to sports practices, in your kitchen cooking dinner, spending time with your family, etc. You know – regular person things!

    And business owner you is exactly what it sounds like. The person that shows up to do their job professionally (even if this looks like juggling both hats at the same time from your living room in your robe on a Monday morning… not that I’m speaking from experience here or anything. 😅)

    While technically this is of course the same person, it’s NOT when it comes to signing contracts in your business. 

    When you sign a contract personally, you run the risk of opening up your personal assets if or when you’re ever sued.

    One of the biggest misconceptions is that when you’re signing a contract for professional use and paying out of your business account, then you’re covered. But that’s NOT the case!

    Before signing ANY contract, it’s crucial that you check the recitals of the agreement (which is the top part of the contract that lists the entities entering into the agreement), and ensure that it lists your BUSINESS name and contact information, NOT your personal name and information. 

    In the actual signing process, yes, you will sign your name, but the difference is that you’re signing on behalf of your business, not as yourself. ✍🏼

    THIS is how you keep your business and your personal assets separated.

    Need More Contract Help In Your Business?

    Overall, contracts are truly one of the most important things for creating a business relationship with ANYONE, but they do have a few nuances like this one that can make them feel real confusing, real fast if you’re not careful. 

    That’s why I’m here to make sure you fully understand the Do’s and Don'ts of Contracts In Your Business AND help you implement them where needed. 

    For more contract help in your business, browse the blog OR grab what you need from The Boutique Lawyer’s Contract Shop!