The Truth About ‘Freebie’ Small Business Contracts

In the interest of saving on legal fees, you may have downloaded a freebie business contract from the Internet. But often it is what you don’t know that...

Copying contracts from the Internet is a bit like wearing your cousin’s old hand-me-down clothing. If you happen to walk into a bee’s nest, yes, you’re “covered,” but the style is outdated and they usually don’t fit well at all.

Most small businesses can’t afford the Versace of contracts, and, frankly, it’s often not necessary. Sometimes, Kmart-style business contracts will do nicely. However, when you download online legal contracts for free, they are usually worth exactly what you paid for it.

Internet contracts need to be amended and altered to ensure they truly fit how you want to do business. But if you have limited experience …  likened to “do it yourself” clothing, you risk having the garment unravel at the seams.


The Truth About Free Internet Contracts

In the interest of saving on legal fees, you may have downloaded a freebie business contract from the Internet. But often it is what you don’t know – and what’s not included in the document — that can hurt you.

Internet contracts can be helpful resources to identify issues, but are usually not well thought out, nor are they tailored to the needs of your particular business. If an agreement is not drafted in your favor, it may not give you the flexibility and protection you really need.

For example, I know of small business owners who have formed limited liability companies (LLCs) and downloaded their agreements from the Internet. When “Janet” got hers from a freebie Internet site, it looked long and comprehensive enough, so she and her co-owner David, signed it.

Four months later, Janet got pregnant and wanted to move to a different state to accommodate her husband’s career path.  While the time was right to transition to her new stage of life, the LLC agreement only allowed her to leave the business (1) if she had died or (2) as long as her co-owner agreed (which David didn’t). In short, Janet’s agreement had no meaningful “exit strategy”.

There were a whole host of things that the LLC agreement did not include, such as how to deal with the client base that each owner brought to the business, how to place a dollar value on the intellectual property (IP) that each owner contributed, and how to leave the business should life changes (other than Janet’s death) arise.

Janet and David’s agreement didn’t cover any of these issues. In the face of an irate business partner and an insufficient agreement, Janet found herself staring down the barrels of (1) a lengthy and expensive lawsuit to dissolve the business or (2) a less expensive, but more costly way to extricate herself from her business partner.

Similar things can happen with even the simplest of business contracts with your customers. Download legal contracts from the Internet all you like, but recognize that the document you copy may not:

  • Reflect the most recent changes in the law and regulations
  • Contain provisions that are helpful to your business
  • Address how you want to do business with customers

Internet contracts may raise some of the important issues, without a doubt. But they don’t necessarily deal with the specific issues of your situation. In short, when downloading from the Internet: “one size fits all” usually means “one size fits none”.


Avoiding Pitfalls of Free Business Contracts

How can you avoid the pitfalls associated with free online business contracts?  Ideally, by working with an attorney who really understands the legal issues that your small businesses faces. Although some entrepreneurs may try to save money with a “do it yourself” approach, they often end up costing themselves more in the long run because they are not trained to spot potential issues and problems that can harm them.

Taking the time to find a lawyer who meets your needs is one of the best investments you will ever make. Find out more about how to hire and work with attorneys by downloading and listening to our How to Choose an Attorney audio class. With the help of your lawyer, you can start to make smarter legal decisions that will protect your company and save you money!


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