Legal paperwork is essential to running any business since it prevents disputes and misconceptions about how things are done on a daily basis. Over the course of a company’s existence, legal documents also safeguard the rights of the owners. In the event of any disputes involving the corporate environment, they aid in maintaining responsibility and openness.
A plethora of corporate legal documents, including sale purchase agreements, employment agreements, and joint venture agreements, etc., are necessary when running a start-up. Over the course of a company’s lifetime, these agreements serve to safeguard the interests of the owners and the company while also helping to organise the workspace.
What are the essential agreements for start-ups?
Before starting a company or making plans to turn the start-up idea into reality, start-ups should consider entering the following essential agreements: –
Non-Disclosure Agreement: –
When dealing with any client or investor, a Non-Disclosure Agreement is the first document which is required to be entered into. The confidentiality of the business as well as that of the other party is maintained by means of these start-up documents. This Agreement is a not just limited to future customers or clients, but also an effective asset to keep the control on the employees. Moreover, it secures the ideas and intellectual property rights, and protecting the start-up.
Employment Agreement: –
To ensure the success of the start-up, it is essential to assemble the team. The justifications for why, as the business expands, it is required that correct contracts are in place for every new hire. As a company with a constrained initial manpower capacity, it might not appear crucial. However, it will go a long way toward helping the staff understand their values and what the business expects of them as an asset.
Shareholder’s Agreement: –
A Shareholder’s Agreement must be in place whenever the firm is ready to move forward with private financing from people or corporations, as the case may be. It is one of the most important start-up documents since it helps to identify the rights and obligations of these shareholders, as well as their ability to exercise these rights. These contracts are crucial because they outline the connection between a company’s shareholders and are important if a co-founder decides to leave the firm.
Strategic Alliance Agreement: –
The partners of a start-up may engage into Strategic Alliance Agreements with each other in order to decide on various tactics in advance and have a very clear purpose in the early stages of a firm.
Technology Lease Agreement: –
Initial resources for equipment or technology may be insufficient for start-ups. As a result, equipment or technology may be leased for a limited time in order to save money and redirect it in a more profitable way. Start-ups may consider engaging into proper Lease Agreements for this purpose.
Vendor-Supplier Agreement: –
Start-ups can enter into Vendor-Supplier Agreements for the delivery of raw materials of various types that are required to run the intended business. Start-ups can get into a Vendor-Supplier Agreement to obtain high-quality raw materials and to negotiate the price upfront to avoid future disagreements. The terms of such delivery and payment should be spelled out in the Agreement as clearly as feasible.
Contractor Agreement: –
Start-ups can save money and time by hiring contract workers or consultants. Accordingly, start-ups can sign into Contractor Agreements for contractual personnel who are hired for a specific purpose and/or for a limited time, particularly in regard to issues such as software. Such agreements are designed to ensure that the intellectual property and other trade secrets developed for the business entity are retained by the hiring party rather than the originator of such intellectual property.
To summarise, it is critical for a start-up to properly prepare a partnership agreement in the event of a joint venture in order to avoid future ambiguity. In terms of agreements with employees, such agreements should expressly and unequivocally define the parameters of such employment in terms of duration, remuneration, fringe benefits, if any, and similar information of a similar nature in order to avoid complications that could lead to complaints or litigation later on.
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali