Five essential contracts every business owner needs

Contracts are the backbone of any successful business, but most founders don't know which ones they actually need, or when.

In this session, Patricia Wing cuts through the complexity and walks you through the five essential contracts every business owner should have in place, from day one to scaling up.

Whether you're just starting out or growing fast, this practical session will help you protect your business, your people, and your future – without the legal jargon.

Topics covered in this session

• Knowing which contracts matter most: The five contracts that form the legal foundation of your business and why missing even one could leave you exposed.

• Getting protected from day one: Which contracts to prioritise when you're just starting out – before problems arise and before they become expensive to fix.

• Growing with confidence: How your contract needs evolve as your business scales, so you're always one step ahead legally at every stage of growth.

About the speaker

Patricia is the CEO and co-founder of SuLe, a smart legal platform dedicated to making legal support more affordable and accessible for start-ups and SMEs.

A qualified corporate lawyer and second-time founder, she brings extensive experience from two top-tier law firms, where she advised businesses from seed stage to Series D.

Watch more expert webinars

Access a growing collection of expert-led webinars covering marketing, sales, finance, growth and more – ready whenever you are.

Transcript

Lightly edited for clarity.

Caitriona: Hello, everyone, and welcome to today's Lunch and Learn. My name is Caitriona, and I'll be your host today.

For those of you attending a Lunch and Learn for the first time, Enterprise Nation is a vibrant community platform for start-ups and small businesses.

I'm pleased to introduce Patricia Wing, who is the CEO and co-founder of SuLe. In this session, Patricia cuts through the complexity and walks you through the five essential contracts every small business owner should have in place, from day one to scaling up.

If you have any questions throughout the webinar, please post them in the chat, and we'll do our best to answer them at the end of the session.

Today's webinar will be recorded, and we will send a follow-up email with the recording and further resources later today.

Over to you, Patricia.

Patricia Wing: Thank you very much, and it's great to be here. Thank you for joining.

I do these sessions quite a lot, so my format is: please stop me as we go. If you have any questions, pop them in the chat, and I will make sure I get back to you as soon as possible.

The format of this session is slightly different. We've previously covered risks and common mistakes. This one is really about contracts.

I'm going to break down what contracts are, why they're important to you, and how they can affect your business. We've broken these down into five different areas, and we'll go through them now.

First, a little background on me so you know who you're talking to.

I'm Trish. I'm a corporate lawyer, and I trained at two of the best law firms in the world. From that experience, you get to know what great legal advice looks like.

Why this matters to you is that I want to use that knowledge and break it down in a way that is really understandable. So please bear with me as I try to do that.

A little fact about me: I do play football, and when I was 19, I set up a football club in South East London for young children that grew from zero to 25 teams.

Now I have a company called SuLe, and the whole point of what we do is to democratise access to legal support for people like you.

So why do contracts matter?

The reason everyone talks about contracts is because when you're doing business with someone, you need a way to understand what the agreement between you actually is.

If you just go on each other's word and one of you breaks that word, who is there to hold that person accountable? That's why contracts are so important.

There are different parts of your business and different parts of your relationships. For example, how you make money: your sales, your clients, the people who pay you money. Those are your customers or your clients.

Then there's what you're building, whether that's technology, intellectual property or something else. That is equally important.

Then there's the internal side of your business: your shareholders, your business partner, the people in your team.

And there's how you comply with regulations, for example data protection and other compliance requirements.

Each of these areas builds up your business. The way we help you build the best business is by ensuring you have contracts in place. That's why, when people talk about contracts, they matter so much. They are like the web of your business.

Another way to think about it is like a house. If you build a house, the foundations matter, but so do the different rooms. Each contract is like a different room in your house that you need to think about.

The first agreement I want to flag is what we call a founders' agreement.

This is a very start-up term. If you're building an SME rather than a venture-backed start-up, you may hear it called a shareholders' agreement instead. Two founders in a business are usually two shareholders, so the terms overlap.

This is a really important document.

Of course, it only applies if you have a shareholder in your company. If you do not have a shareholder, then you do not need a shareholders' agreement.

But if you do have a business partner, then you should think about having one.

Why? Because when you set up a company, particularly a limited company in England and Wales, you usually do that because you want to grow it, make profit from it, or eventually exit it.

If you do not have a shareholders' agreement and you simply add someone to Companies House, what you are essentially doing is giving that person part of the company without any restrictions, expectations or accountability.

That person may be like a sister to you, like a brother, or your mum's best friend. But often, it is those relationships where things go most wrong.

From my experience, having spoken to thousands of founders, when relationships are built only on trust and they go wrong, it hurts the most. You can be completely blindsided by not having an agreement in place.

Sometimes, if we just set out clearly from the beginning what the expectations are, it actually creates a much more successful relationship.

So think about things like: what are the responsibilities of each of you? What should each of you be doing?

Clearly define the decision-making powers of each of you. Do you both have the right to take a salary, take dividends, or vest into the company over time?

What happens if you disagree and one of you needs to leave?

These are all the kinds of things that, if you deal with them early, really protect you.

One thing you should know is this: if you add someone to Companies House and assign them shares without an agreement with restrictions in place, that person gets to keep the shares.

If that person leaves the company, they take the shares with them.

Why that matters is because you can build the company for years and make millions of pounds, and that person will still own shares in the company.

That is why it is so important to think about how to protect yourself at the beginning.

The next thing I want to talk to you about is IP, intellectual property. IP is arguably one of the most important areas of a business.

For most businesses, unless you are purely providing services, IP is essential. And even then, you will still have IP of some kind.

If you do not own your IP, your business is essentially worthless, because you do not own what you have built. That is why legal becomes so important.

It is such a non-tangible thing to think about, but if you do not have it in place, then you do not actually own your business, which is crazy.

The reason I say this is because under English law, and actually in a lot of legal systems around the world, when you create something, that belongs to you.

So whether that is a drawing, a piece of artwork, or written material, that belongs to you because it is your creation.

But in a business context, if you have hired someone to create something for you – say they built your product or designed your logo – and they have not assigned that to you, then they own that work.

They own that piece of creation, and you do not.

The only way to change that is either: one, they are an employee, because employees are contractually obliged to transfer that to the employer; or two, you have what we call an IP assignment agreement.

This is one of the most important things for businesses that want to grow and have assets.

Think about who is building your code, who is working on your website, who designed your logo, and who is building the key things in your business.

Have they assigned the IP to you? If they have not, then you need to fix that.

There's a question in the chat, so I'll answer that.

NDAs. I think everyone on this call probably knows what an NDA is, so I do not need to explain it in detail.

The reason I'm showing NDAs is because they are one of those tick-box exercises that become really important.

If you are looking for investors, looking to be acquired, going for ISO 27001, dealing with data protection, working with big enterprises, or trying to grow your business, this becomes an important step in that process.

These people – whether it's an investor, an acquirer or a procurement lead – will ask you: do you use NDAs with everyone you share confidential information with? That is a very common question.

If you haven't been doing that from the beginning and you think an NDA is worthless, that can reduce your chances of being successful in those relationships.

To you, this may feel obvious, but it matters. You should be having a confidentiality agreement, an NDA, with anyone that you are sharing confidential information with.

There are obviously limits to this. If you are talking to an investor for the first time and you're just saying, "Here is my business and what we're trying to do," you do not necessarily need to get them to sign an NDA before you say anything else.

But if you are about to share how your product really works, or the details behind what makes your services special, then before you do that, you should have an NDA.

If you are unsure, just check with a professional to see whether what you are sharing is properly protected.

A lot of legal is not about right now. It is about the future. With legal, you do not always know the implications in the moment. Often, the issue appears later.

So if you are serious about growing your business, just do it.

There's a question here: is it true that NDAs are virtually unenforceable?

It is a common thing people say, and yes, it can be difficult to enforce an NDA. But I wouldn't think about it like that.

If you do not use NDAs, you may struggle to get significant investment. You may struggle to be properly acquired and get a strong valuation. You may struggle with compliance certifications like ISO, Cyber Essentials or GDPR-related due diligence.

So do not think about it purely in terms of enforceability. Think about it as an expected business practice.

Yes, it can be difficult to enforce, but that does not mean you should not be using them. The industry expects you to have them, so you should implement them.

There's another question here from Winnie: "If I create a workshop model for resilience as part of my business, do I need to protect that?"

We're talking here about different forms of IP. One form of IP is copyright. For example, this presentation would be protected by copyright, and other presentations you create would be too.

The way to help with that is to put your name on it. That helps establish copyright.

Now, if you paid someone to build a programme for you or create a presentation using your content, you need to make sure you own that.

If they created it and haven't assigned it to you, they may own it. So yes, if someone else is involved, you need to ensure that the IP is assigned to you.

Another question: "Do I need to hire a corporate lawyer?" No, you do not need to hire a corporate lawyer.

You just need the right protections in place. If you are in doubt, and especially if you are early stage and do not want to spend lots of money on lawyers, get the relevant person to sign an IP assignment agreement.

That creates the protection you need for ownership of the IP.

You do not need to spend money on a copyright lawyer unless you have really valuable IP.

For example, if you had a drinks company and had developed a unique product formula, that could be hugely valuable and might justify specialist advice.

Or if you had developed an innovative product like a hardware device or unique technology, then you might need an IP lawyer involved.

But if it is about presentations, materials or general business content, and it is not the most valuable part of your business, you probably do not need to spend on a specialist lawyer.

There's another question: "What is DD?" That stands for due diligence.

It is a process that investors, buyers, and compliance organisations go through where they review your business against a checklist of requirements.

They look at things like: do you protect your confidential information? Do you secure your IP? Do you have agreements with your co-founder? Are your shares protected?

These are all signs that you are making good business decisions, and that is part of what they are checking in a due diligence process.

That leads me to the next point: employment and contractor agreements.

In the UK, we have employment rules, and you may have heard of cases like Uber drivers being classified as workers.

There is a lot of discussion around what is considered an employee, a consultant or a worker. As a small business, you want to avoid ambiguity around what someone is in your business.

If you are hiring someone to work in your restaurant, make coffees, make food, or hand out food, then they are likely an employee. You should treat them as an employee.

That means having an employment agreement, setting up payroll, making sure they have a pension, checking their right to work, and making sure your business complies with health and safety and employer liability insurance obligations.

But say you are hiring someone to help with your social media. They do not necessarily need to be an employee. They could be a consultant or contractor. In that case, you need an agreement that says that.

The reason this matters is because if someone later tries to claim they were an employee when they were not, you need the paperwork to show the relationship clearly.

Typically, a consultant or contractor determines their own hours, sends invoices to the company, manages their own taxes, and comes with their own tools.

An employee, by contrast, has taxes handled through payroll, is told their hours, and is generally managed by the business on a day-to-day basis.

This is important because in the UK, if an employee is disgruntled, they may take you to an employment tribunal.

Because they do not have to pay much to start that process, and because it can be weighted in favour of the worker, it can become a huge cost to a company.

It can cost 15k or more, and one of the ways you can protect yourself is by making sure there is no ambiguity in the relationship and that the contract reflects the reality.

There is a question in the chat.

"What about a mobile developer freelancer who built my app? I got them to sign an NDA and contract agreement. Is that enough?"

You said two things there that are contradictory: you said you employed a freelancer.

You cannot employ a freelancer. So my first question is: are they a freelancer or an employee? If they are a freelancer, then what you have right now is not enough.

If they are just a freelancer, then they commonly own the code and the IP behind the app unless they have assigned it to you.

This is a very common problem in the industry because people do not understand how the law works: if you create the IP and you are not an employee, you usually own it.

So your solution, very quickly, is that you need to get them to sign an IP assignment agreement. That is what you need to do as soon as possible. I would not pay them anything else until they sign this.

You do not need to make it intense. Just say, "As part of our process, everyone who works on the product signs an IP assignment agreement. This is just to show that we own the IP, which I'm sure you understand."

Make it casual and practical, and do it before the next payment. If they have any issue with that, then you need to take advice quickly.

For everyone else on the call, the key steps are: if you are hiring a freelancer, get a freelance agreement in place. You can include confidentiality in that agreement, or do a separate NDA if you want.

But you also need a separate IP assignment agreement. That is what I would recommend.

Now, I just want to quickly touch on the different kinds of client agreements, because they depend on what kind of business you have.

If you are a consultancy company or provide services, and you want to work with bigger clients, then you will often have what we call a services agreement or a master services agreement. That is the main contract.

Then, if you do a new project under that relationship, you would usually issue a statement of work, or SOW, for the specific project.

You might have seen this with larger organisations. They have a master agreement in place, and then each product or project sits under it as a separate scope document.

You can also have a retainer model, where someone pays monthly for ongoing services. That is very common if you are hiring a lawyer, product designer or other service provider on an ongoing basis.

If you have a SaaS platform or online product, you will usually not use a long master services agreement.

Instead, you will have website terms and conditions, and people will click "I agree" when they sign up. That is very common for app businesses and online software businesses.

So the kind of agreement you need depends on the type of business you run.

Another question here: "How do I know what is my IP and worth protecting?" The short answer is: everything you create is IP.

The question is really about how valuable it is, and what kind of protection it needs. Different types of IP are protected in different ways.

A brand is usually protected by trade marks. Written work, presentations, frameworks and materials may be protected by copyright. Something genuinely new and innovative, like a technical invention, might be protected by patents.

What I would say to you is this: think about what the real value of your business is.

For us at SuLe, the value is in our platform, our brand and our customer base. So that tells us what we need to focus on protecting.

If there is something in your business that is genuinely valuable and distinctive, then you should think about how to protect it properly and, if needed, get advice on the most suitable way.

Another question: "We are selling our carpet, rug, sofa and floor-cleaning business. We have used AI to help us create the contract between us and the buyer. Should that be enough?"

No. You should definitely get that checked by a lawyer.

If someone is buying your business and you are transferring the shares or assets, this is not something I would leave to AI-generated documents alone.

It is not just one contract. There are usually multiple contracts and steps involved.

The risk for you is that you transfer the business and then do not get paid properly, or the contract is not enforceable, or key terms are missing.

If money is tight, I understand that. You may not want to spend heavily on legal support.

But at the very least, get a lawyer to guide you through the process or review the key documents and structure.

And congratulations on selling your business – that is really exciting.

My final point is about the other parts of your business: the people who help you make money.

These are your suppliers, manufacturers and other partners. You also need contracts in place with them.

That is because people can take advantage of you. They may say they will deliver products on a certain date and then not do it.

If you have contracts in place, you can take action.

If they are late and that delay costs you money, then the contract can provide remedies, and you may be able to include penalties or protections.

So if your product business depends on someone delivering milk, packaging or ingredients on time, and they do not, they need to be held accountable.

That is why supplier agreements matter too.

Perfect. I think that is every question done. Thank you all for listening. I think we are right on time.

Caitriona: Thank you so much, Patricia, for today's presentation.

Explore our webinar library

Unlock more on-demand sessions designed to help you sharpen your skills, grow your business and stay one step ahead. Find more Lunch and Learn webinars