Whether you’re just starting your online business or you’ve been established for a while, getting contracts in place is a must.
In broad terms, a contract is a set of promises. One person promises to do something in exchange for something else from the other person. Contracts can be oral or written. And both can be legally enforceable.
BUT proving an oral contract can be a pain. Because it comes down to a lot of he said/she said.
To complicate things, each state has differing laws about what contracts have to be in writing (also known as the Statute of Frauds).
In my opinion, all contracts should be in writing for your online business.
Before I go any further, know that everything I share here is legal education and information, not business, financial, or legal advice; it does not create an attorney-client relationship between us; and you should chat with an attorney in your local area to make sure you’re taking the right steps for you and your business.
Here’s a list of 6 contracts you need for a legit online business:
1. Client Agreement
And yes, this includes if your clients are friends and family members too!
Because who wants to piece together emails, Facebook messages, and recollections from phone calls to prove a meeting of the minds if a dispute arises with your client?!
2. Independent Contractor Agreement
If you intend to hire a Virtual Assistant, Bookkeeper, Copywriter, or an individual in some other niche – NOT an employee – you want to be sure to have an independent contractor agreement in place.
Many independent contractors have their own contract. If that’s the case, negotiate based on their contract (you don’t want to get into a situation with dueling contracts). As a business owner, it’s important to know that contract negotiations are normal. Make sure the contract contains a provision about their independent contractor status.
Having an agreement in place is helpful to both establish expectations AND have evidence that the worker is truly an independent contractor (to avoid misclassification issues with the IRS).
Independent contractors receive a 1099 from the companies they work with and are required to pay 100% of their own self-employment and income taxes.
Not sure how to determine if someone is an IC or employee? Read this.
3. Nondisclosure Agreement (NDA)
Whether you have been thinking about collaborating with another business, hiring a freelancer (aka an independent contractor), or working with potential investors, you should consider having an NDA in place.
An NDA is a legal obligation to keep a secret – it’s a legal contract between parties that outlines what private business information cannot be shared with other people and businesses (think passwords, email addresses, leads, how you price things, proprietary materials you create, original ideas or processes- that you don’t want shared with your competitors or the public).
You can read more about NDAs here.
That’s because the California Online Privacy Protection Act (CalOPPA) and the California Consumer Privacy Act (CCPA) make it mandatory if a Californian resident interacts with your website (and hint, with the reach of the interwebs you never really know where your website users will reside).
And the European Union’s General Data Protection Regulation (GDPR) makes it a requirement if you process personal information for even 1 EU or UK resident
Personal information isn’t just email addresses. The term includes first and last name, telephone number, and anything relating to the person’s physical, physiological, genetic, mental, economic, cultural, or social identity, among other things (like IP addresses, date of birth, etc.).
And under GDPR, its important that your website users affirmatively agree that you can collect their personal information (i.e., check a box to say they agree, also known as a click wrap in internet law) rather than just sticking them in your website’s footer (a browse wrap)
5. Terms and Conditions for your website
If you have a website, Terms and Conditions (also known as Terms of Service) are the ground rules for your website and layout things like how your content can (and can’t) be used, limitations of liability and disclaimers, how and where disputes will be handled, third-party and affiliate links, etc.
Terms and Conditions aren’t actually legally required BUT they are the first place a Court will look if a dispute arises between you and one of your website users.
Best case scenario is to ask your website user to affirmatively agree to your Terms and Conditions (i.e., check a box to say they agree) – because this creates a contract. You can head here for more information about Term and Conditions.
Again, the best course of conduct is to require your customer to check a box indicating they agree.
So there you have it, 6 contracts to make sure you have a legit online business. As a note, this is NOT an exhaustive list, but an overview of some of the essentials for a legit online business.