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5 Essential Contract Agreements for Startup Businesses

Starting a business requires you to make strategic decisions. You also form relationships with many other companies and individuals such as investors, vendors, employees, and co-founders.

To reduce uncertainty and risk for your startup, you need to formalize these relationships with contracts. This establishes a robust legal structure for your business, protecting it from legal liability from the beginning.

Contracts are vital for the success of your business. However, as your business grows, the number of contracts you handle daily increases exponentially.

Without a cohesive process, it becomes increasingly complex to manage all your signed contracts. This can result in many problems that can hurt your success in business, like missed deadlines, expiries, and increased liabilities-says one Senior manager at LegalDrop.com

You need contract repository software to store, organize, search, access, and view all your signed contracts whenever you want.

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Here are some important contract agreements you need to protect your startup business from legal troubles:

1.  Operating or Shareholder’s Agreement

A shareholder’s or operating contract is a must-have if you’re going into business with one or several partners.

This legal document should be created at the beginning of your business’ lifecycle to set up a solid business structure before you, and the other partners enter into it.

While there isn’t a defined outline for an operating contract, there are some important provisions your contract should include.

Firstly, your contract should specify the percentage of ownership and the responsibilities and duties of each shareholder.

Your shareholder’s agreement should also include an exit strategy should one of the partners decide to leave the company and the procedure to transfer or sell their interest to third parties.

Your operating contract should explain the procedure for dispute resolution in case disputes arise between the partners.

It may also indicate the circumstances that could lead to the dissolution of the company and the method to distribute assets should it dissolve.

2. Employment Agreement

When you’re ready to start hiring employees, you’ll need an employment or independent contractor contract to ensure all parties involved understand the scope of employment.

This contract specifies the role or responsibilities of your new employees in the company and their compensation, including salary amount and benefits.

This helps strengthen your relationship with new employees and clearly outlines the obligations and expectations of your startup business and the employees.

Like the founder’s contract, an employment contract can vary from business to business or even from employee to employee.

For instance, you may draft an employment agreement for a specific employee to keep them from exiting the company too soon.

Having employment contracts can protect your startup from legal liabilities by former contractors and employees.

3. Confidentiality or Non-Disclosure Agreement

A non-disclosure or confidentiality agreement is a must-have document for startups and established businesses alike.

This document ensures all parties involved in your startup business don’t reveal or share your business’ confidential information with others.

Some important company information to keep confidential includes your client contact information, marketing strategies, new product information, software code, and other info that gives you a competitive edge in the market.

Any person you share confidential information with should sign a non-disclosure contract. These can include your employees, manufacturers and suppliers, investors, board members, vendors, prospective investors, and others.

Once signed, a non-disclosure contract ensures the signees don’t release or divulge any information.

4. Intellectual Property Assignment Agreements

An intellectual property assignment contract ensures your startup owns all inventions, discoveries, ideas, and work products that your employees generate.

This is especially crucial when you’re dealing with independent contractors because they mostly work for multiple companies at the same time.

Once signed, the employees should assign their inventions and products to your startup. They should also disclose to you any ideas, products, and inventions made during the period of employment.

This gives your startup total intellectual property ownership, so nobody can later claim the invention or product belongs to them.

5.  An Investment Agreement

As your startup grows, you’ll need to raise capital for growth expansion from investors. These investors can be existing shareholders, external shareholders, or new shareholders.

Since the incoming investor will have ownership rights in your startup, it’s imperative to draft an investment agreement to reduce the likelihood of disputes.

This legal document clearly outlines the terms and conditions for your incoming investor. That includes the rights to purchase new shares, restrictive agreements on the transfer of shares, and many more.


These are some of the must-have contract agreements for your startup business. These contracts make your business relationships smoother and more efficient and protect your business from any uncertainty in the future.

Ensure all your contracts are properly drafted and well-thought-out since they’re vital for the success of your business.


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