By: Erika Rykun
Working with remote teams is cool but not easy. In this article, we discuss what business documents you need to start working with your virtual team the right way.
As a small business owner, you have many pressing matters that need your daily attention. It’s likely that business agreements and contracts are near the bottom of your to-do list. These mainly come into play when you have legal fires to be put out, right? And you’re so busy dealing with day-to-day crises, you have little time to even think about such things.
But planning ahead is essential. The reality is, your business will run more smoothly if you have agreements in place before a dispute arises. In many ways, a legal document works like insurance.
If you work with a remote team, or if you plan to hire people who are not located in the same area as you, things can get even more complicated. Even though it can feel overwhelming, a bit of extra documentation should not prevent you from tapping into the worldwide talent pool. The ease of access offered by technology is incredible and provides your business with an unprecedented advantage in front of competitors!
Dealing with legal documents doesn’t sound like a lot of fun, but once you know which agreements are essential to your business, you’ve already won half the battle.
The following is an intentionally general list of business agreements that will help smooth potential bumps in the road that your small business might face. Keep in mind that depending on your industry, other agreements may also be important for your company and team of remote workers.
Unless you’re a sole proprietor, you should have an operating agreement for your company. Depending on how your business is structured, this type of agreement might be an:
- LLC operating agreement: Use an LLC operating agreement if your business is a limited liability company.
- Corporate operating agreement: If you are incorporated, you either have a C corporation, the standard form of corporate structure, or an S corporation, which is taxed under the IRS’s S corporation tax rules. Either way, you should have a corporate operating agreement, often known as bylaws, in place.
- Partnership agreement: Use a partnership agreement if you’re running your business as a partnership.
The goal of each of these agreements is to specify how your business will be operated. This helps clarify the roles and responsibilities of all parties involved, and will help prevent misunderstandings and conflicts down the road.
Even if you plan to hire only one employee, it’s essential to have an employment agreement in place from the start. This protects you as the employer, and also your employee, because it clarifies all the terms of employment.
Setting these terms in writing means you can begin the employment relationship free of misunderstandings. Moreover, a signed employment agreement will protect you in the event of a future employment lawsuit if the relationship takes a wrong turn.
In the case of remote workers, things can be a bit more delicate, especially if they are located in a different country or even continent. One way to protect your business, practices, and ideas is to ask your employees (remote or local) to sign an NDA. When it is well-written, such a document can protect your company from corporate espionage and data breaches, according to LegalZoom.
Quick note: the relationship with remote workers is a bit different than the one with people you see in the office every day. For instance, it’s best to focus your attention on the goals achieved and not the number of hours spent working on a task. You should also help remote workers reduce productivity killers by implementing a workflow that’s tailored to their needs.
Independent Contractor Agreements
Many small business owners need specialized help, often for a short period of time, and it’s usually the most practical and cost-effective to bring on an independent contractor rather than hiring more staff.
Like an employment agreement, your independent contractor agreement should set out the terms of the project for which you’re engaging the contractor. It’s important that your agreement stipulates that the other party is working as an independent contractor and not as an employee. Significant tax consequences can arise from this distinction between independent contractors and employees.
For example, if a person is an employee, your business, as the employer, is responsible for paying employment taxes. Independent contractors, on the other hand, are responsible for their own employment taxes.
General Business Agreements
You should consider using a general business agreement any time you enter into an arrangement with another individual or company. While in certain instances you may feel that a “handshake deal” is sufficient to protect your company’s interests, it’s impossible to predict the circumstances that might lead to a disagreement down the road.
By having the specifics of each of your arrangements set out in writing in a well-drafted general business agreement, you reduce the potential of such future misunderstandings. Because even small disagreements can prove extremely costly to a small company — with consequences from loss of reputation to expensive lawsuits — a general business arrangement is a wise ounce of prevention.
Keep in mind that the main goal of any agreement you use is meant to protect you and your business. Of course, you also need to protect the interests of your employees and establish a company culture that encourages progress in a friendly atmosphere. Even though they don’t look too friendly, business agreements clarify the terms of your relationships and help reduce the chances of future conflict.
About the author
Erika is an independent content manager and copywriter. She is an avid reader who appreciates unread books more than read ones.