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A Guide to Must-Have Legal Documents When Starting a New Business

Julia RichardsDecember 2020
A Guide to Must-Have Legal Documents When Starting a New Business

It is the secret terror of every new and existing business — getting sued!

Even if you have expert legal counsel by your side and win any ensuing legal battles, the costs of lengthy litigation can be crippling for startups.

Recouping those costs as a result of a victory does nothing for your business if it went under meanwhile because of dried-up cashflow and the inability to borrow more money.

Iron-clad contracts and legal documents are an absolute must for new and existing businesses.

Hiring lawyers to put these together has, historically, been a costly affair. But it is now possible to purchase standard legal document templates which take care of most of your legal requirements, needing only minor touch-ups to adapt them to your business.

Below is a list of some of the legal documents your business might need in order to avoid expensive litigation. Such documents don’t guarantee that someone won’t try and take legal action against you for any perceived wrong. But they do guarantee that all agreements are written down and agreed to by all parties, either making litigation futile or quickly resolved.

Let’s take a look at some of the legal business document templates that you will need in your startup.

(We must mention that none of the following can be taken as legal advice. Please consult with a professional for any specific advice related to your company and situation.)

 

Non-Disclosure Agreements (NDAs)

Non-Disclosure Agreements (NDAs)

Recently a hot topic in the news, NDAs are a mainstay of the business.

Non-Disclosure Agreements are typically used to protect company secrets which could cause damage to the company if disclosed.

There are different degrees of NDAs, and the wording for each depends on what degree of strictness each party wishes to apply to confidential information.

Some NDAs specify that anything with the word “confidential” on it should be treated confidentially. These are fairly loose in their rigour.

Others, however, delineate that any and every exchange between the parties involved must be kept in strictest confidence, even going so far as to specify the minimum degree of financial damage and liability that revealing such information might lead to.

NDAs tend to be difficult to enforce, and there are people who simply refuse to sign them.

Utilising an NDA really depends on the nature of your business and whether the loss of information might cripple it.

Our advice is to use NDAs only when essential.

 

Consultancy Agreements

If you work with freelancers and contractors who are not employees at your company, it might be a good idea to utilise consultancy agreements.

A consultancy agreement specifies the terms of the relationship between your business and the contractor or freelancer.

It is imperative that contractors not be treated as employees; otherwise, both you and the contractor might end up suffering. Being “inside IR35” means the contractor will walk away with less money and that you will need to pay taxes on the work the contractor does for you.

Red lights that might make HMRC consider a contractor to be inside IR35 include:

  • A fixed working schedule
  • An email address for the contractor which works off your company’s domain
  • A desk or fixed place the contractor is entitled to use at your office.
  • consultancy agreement

A consultancy agreement should clearly delineate a contractor’s responsibilities, what is expected of them, a payment schedule and invoicing terms.

 

Employment Contract

Employment contracts are vital to protect both the employee as well as the employer. An employment contract states very clearly what the legal relationship between employer and employee is, expected duties, wages, non-competition clauses, non-solicitation agreements and sometimes even a confidentiality agreement.

Another important thing to include in employment contracts is a time-off policy. This should include information on paid vacation days and whether or not these accrue; sick days, family emergencies, maternity and paternity leave, etc.

In a post-COVID world, it is advisable to include information regarding what is expected of an employee in case they show symptoms of illness. Also, a work-from-home or flexi-hours policy should be well defined and delineated.

There are other elements that can be included in an employment contract, but the above cover the essentials.

 

Fire Risk Assessment Forms

Often overlooked, fire assessment forms are crucial to show that you, as the employer, are taking sufficient precautions to ensure your employees are not put in any danger.

It is the responsibility of an employer to carry out a Fire Risk Assessment on the premises and to regularly review it.

The findings of such an assessment would then be noted in a Fire Risk Assessment Form.

 

Fire Safety Evacuation Procedure Document

As the person responsible for ensuring that employees are not endangered at work, it is incumbent upon the employer to provide a proper fire safety evacuation procedure document that all employees can view and understand.

Fire Safety Evacuation Procedure Document

The document — usually hung up on a wall where it is prominent to see — must show clearly where the escape routes are, the emergency doors that are easy to open, a secure meeting point for staff, etc.

 

Invoices

An invoice is often overlooked as a legal document. Failures to comply with the basic requirements of what goes on an invoice might result in unforeseen liabilities such as unpaid bills or additional taxes.

By law, an invoice in the UK must include:

  • Your company’s name, address and contact info
  • A clear description of the item being charged for
  • The date
  • The amount being charged
  • A unique number
  • The company name of the company being charged
  • The address of the company being charged
  • The supply date of the goods or services
  • If applicable, the VAT amount
  • The total amount which is due.

Sole traders must include their name as well as the business name they are using. The invoice must also include an address where legal documents can be delivered.

The business name of a Limited Liability Company must be the full name, as it appears on the company’s certificate of incorporation.

VAT invoices require even more information to be included, depending on whether you are issuing a “full VAT invoice” or a “simplified VAT invoice”.

 

Service Agreements/Service Contracts

Service Agreements are crucial elements of business in order to delineate very clearly what is expected of a service provider.

These service agreements are sometimes also called Service Contracts.

These agreements delineate the full terms of the service which is about to be undertaken, specifically:

  • The extent of the service
  • The expected final product of the service
  • Amount to be paid
  • Expected payment date
  • As well as any other detail which is pertinent.

Service Agreements can save a tremendous amount of hassle if the relationship goes south and a disagreement ensues.

It is always best, in business, to try to take the high road and avoid unnecessary scuffles with clients.

But these things can happen despite one’s best efforts to prevent them.

When they do happen, it is essential to have a Service Agreement in place in order to have a valid claim for any funds owed.

Service Agreements can be written specifically for B2B or B2C services.,

 

Supply of Goods Agreement

When a supplier enters into an agreement with you to supply goods, a “Supply of Goods Agreement” (or “Contract”) is necessary to ensure that the terms of supply, payment and details of the goods themselves are properly laid out.

These agreements can be worded in such a way that they are more favourable to the supplier, to the purchaser or to both.

Whichever method you use, it is vital to have all information down in writing and signed and agreed to by all parties.

The larger the purchase, the more crucial it is to have these conditions set down in writing so as to prevent loss of income in case the supply of goods does not match the order.

Such a contract is, ideally, begun with clear definitions of the meanings of terms and words used throughout it so as to avoid ambiguity.

 

Privacy Policy

In this world of Data Privacy Regulations, privacy policies are vital to ensure your business is not slapped with heavy fines for violations.

If you service any clients from the EU or retain any data of EU citizens, it is vital that you adhere to all General Data Protection Regulation (GDPR) mandates regarding how that data is stored and handled.

Additionally, you are required by law to inform customers clearly regarding how this data is stored and processed, in your Privacy Policy. You are also required to provide the name and details of any “Data Controllers” in the privacy policy, as well as a way for customers to contact you regarding their privacy concerns.

Europe is not the only jurisdiction with strict privacy regulations in place. California has the newly enacted California Consumer Privacy Act (CCPA) which came into force in 2018 and was updated in 2020. It has been compared in severity to Europe’s GDPR.

Australia does not legislate specifically regarding online privacy, but it does have several privacy laws in place that must be adhered to when conducting business online.

Privacy Policy

No-doubt, further laws will be enacted, requiring that businesses provide clear, easy-to-understand and thorough privacy policies on their websites.

Not doing so can be unnecessarily costly.

 

Advisor Agreements

Sometimes a business mentor will charge for their services. Professional advisors and coaches who make their living from advising other businesses, certainly do.

Just like any other agreement with suppliers and service providers, it is imperative to delineate the details (including deliverables, expected remuneration and payment terms) in an advisor agreement.

Sometimes, the remuneration is in terms of equity or a share of the company’s profits. At other times, it is a fixed fee. In either case, how the advisor is going to be paid, and when, should be spelt out in unambiguous language in order to prevent potential legal difficulties down the line.

As with all matters in business, things can be rosy and optimistic in the beginning. But, once the honeymoon is over and the “long haul” begins, one only has contractual terms and written agreements to fall back on.

Make sure all those agreements and contracts are solid.

 

Website Disclaimer

People often mistake website disclaimers, terms and conditions (or “Terms of Use” or “User Agreement”) and privacy policies.

They are each different things.

In a nutshell, the purpose of a website disclaimer is to limit the liability of the website owner(s) for any information presented or services and features provided through the website.

Sometimes, terms and conditions contain a disclaimer clause.

As with all legal documents, there is no “one-size-fits-all” option for disclaimers, although many follow a similar template.

The best disclaimer is one that fits the needs of your business perfectly.

Disclaimers can contain language intended to dissuade people from copying content on your website and using it without attribution. A disclaimer can also be used to inform users on the limits of your knowledge (e.g. something to the effect of: “You understand that the information on this website is not written by experts but merely offers an opinion of matters and should not be considered as professional advice.”)

If you have third parties involved in your website (e.g. advertisers or guest bloggers), it is important to disclaim any liability on their part as well. You can also add disclaimers on your website that apply to your social media accounts.

 

Terms of Service/Terms and Conditions/Terms of Use/User Agreement

The Terms of Service (“TOS”), Terms and Conditions (“T&C”) or User Agreement specifies the agreement a user automatically contracts into by using your website.

Terms of Use are essentially a legal contract that can be enforced by law. T&Cs will often be worded in such a way as to indicate agreement to the contract “by continued use of this website”, but it’s important to know that enforcing such “contracts” is unlikely to be very successful.

Terms of ServiceTerms and ConditionsTerms of UseUser Agreement

Legally binding contracts require an explicit agreement between the parties involved. Enforcing T&Cs and User Agreements becomes much easier when people take some action on your website, which requires them to give their name and then to explicitly agree to the terms, such as:

  • Purchasing a product (such as on an eCommerce website)
  • Registering an account on the website.

These T&Cs are absolutely enforceable, and this then becomes one of the most vital legal documents that you must have in place if you provide an online service or product.

 

Health and Safety Policy

Businesses in the UK are required to have a Health and Safety policy. If your company has five employees or more, then this policy needs to be written down.

Health and Safety Policy

Your business’s Health and Safety Policy needs to assure employees that you are committed to their health and safety. Specifically, it must let employees know who is responsible for health and/or safety in the workplace and what plans you have to make the workplace 100 per cent secure and safe for employees.

Such a policy has become even more vital in these post-COVID times.

The policy should lay out precisely what actions you are taking, which will eliminate any health and safety hazards and risks in the workplace.

By “hazard” and “risk” are meant anything which can cause harm to people. This could be in the form of dangerous chemicals, electrical hazards, industry-specific risks (such as in construction sites), etc.

Part of eliminating these hazards can include training staff, hanging up signs in the workplace that indicate hazardous areas or which inform employees of anything related to keeping the workplace conducive to health and security.

In a post-COVID world, such signage might include signs to remind employees to wash their hands or to observe social distancing.

 

GDPR — Due Diligence Checklist

The legal documentation required to comply with GDPR (“General Data Protection Regulation”) is quite staggering.

We won’t cover all the documents here, but rest assured that our Legal Document Templates package contains all the GDPR documentation you need to ensure your company is in compliance with GDPR laws.

GDPR violations can lead to stunning fines. This fact has been used by many unscrupulous individuals to scare businesses into buying their products which purportedly make that business “more GDPR compliant”.

But it’s important to understand that the most severe penalties would apply to companies that are in egregious violation of GDPR policies.

One of the factors that courts take into account in reviewing GDPR cases is how much due diligence was taken by the company to protect private user data.

We live in a world where, unfortunately, the theft of online data has become rather commonplace. Even companies that take the utmost care to protect user data are still at risk from ever-advancing technology and methods to pilfer digitised information.

To this end, it is imperative that you show the courts that you’ve done everything in your power to ensure that user data was kept and maintained securely by you.

Enter: The Due Diligence Checklist.

Such a checklist takes the guesswork out of ensuring your business is GDPR-compliant. By simply following each point of it, you will be moving your business closer and closer to compliance. And you will also be able to show the courts — in the event of any litigation — that your business takes privacy seriously. This can go a long way in mitigating penalties ensuing from data breaches.

 

Other GDPR Documents

Some of the other GDPR legal documents you need are:

  • GDPR and Data Privacy Strategy document
  • Data Security Policy
  • Information Audit Document
  • General Data Protection Notice
  • Data Classification Policy
  • Controller Processing Activities Document
  • Retention and Erasure Policy
  • Privacy Notice and Consent Document
  • Due Diligence Checklist
  • Subject Access Request Form
  • Data Breach Policy Document
  • Lawful Basis for Processing Document
  • Employee Consent Document

Summary

As you can see, the number of legal documents you require could take ages to put together or could cost a pretty penny if you had a lawyer design each and every one of them.

But having these documents to hand can save you plenty of headaches and costly legal battles in the future.

Make sure your business has templates in place for all of the above so that you are legally protected should anything go wrong.

About author
Julia Richards
Julia Richards

I am the head content writer at Start My Business with over ten years of experience in copywriting and content research. I specialise in writing topics for SME's, finance and digital marketing.

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