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Your #Smallbiz Contract Isn’t A Crockpot: Don’t Draft It And Forget It

Unlike those glorious crock pots that let you “set it and forget it” when you’re making dinner, drafting a contract for your business and then neglecting it is...

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For example, an LLC may have originally granted the manager the right to enter into a lease without needing the consent of the owners. Over time, the owners decide this is not a right they’re comfortable giving the manager. They should change the operating agreement accordingly.

Conversely, the operating agreement may already restrict the manager’s right to enter into leases for the LLC, but the manager has been doing it all along and the owners have been allowing it. If the business operates in a way that conflicts with its operating agreement, an owner may challenge those actions, either in the boardroom or in court, resulting in complications.

 

Intellectual Property Ownership

Independent contractor agreements where one party is creating something for a business, like a logo or software, usually include a provision outlining the ownership of what is being created. Sometimes, the business will own what the contractor creates and sometimes the creator will. This provision is incredibly important and must embody the intent of those parties. It’s never “one-size-fits-all.”

 

Independent Contractor Agreements

A common provision in independent contractor agreements provides for the contractor’s ability to use their own employees or contractors to carry out the job. Pay attention to these provisions and update them accordingly!

Each project will be different, and so will your needs. If the project requires the special skill of that particular contractor, then a provision should limit outsourcing. If you commission Michelangelo to do a painting for you, then you probably want Michelangelo alone to complete the task. See how important this provision is? Don’t let this provision turn into the old wallpaper you’ve grown used to and hardly even notice.

 

Put A Lid On Crockpot Contracts

The phrase “Set It and Forget It” is the anthem for slow cookers (i.e., crock pots) – well, at least the ones with that feature. It makes sense. Sometimes, your only role in cooking is making sure the kitchen doesn’t catch fire before the casserole is done. But this just doesn’t hold true with contracts.

Business contracts are important documents that need regular attention and finessing. Remember: if the contract was important enough to be created originally, then it’s important enough to review regularly. Keep an eye on your agreements and they will serve you well!

 

Disclaimer: This article is for informational purposes only and no attorney or client relationship is formed by or through this article. It is not legal advice.

This article has been edited and condensed.

Shushan Barsegyan, Esq. is a founder and partner at Full Circle Business Law, a Los Angeles-based law firm helping startups and small businesses with a variety of business law needs. With personal experience starting a business and a bachelor’s degree in business administration from the University of Southern California, Shushan understands the unique perspective of the entrepreneur and small business client. Her excitement for entrepreneurship makes being a lawyer actually fun! Connect with @fullcirclebl on Twitter.

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