Small Business 101 Small business 101

6 documents everyone needs to run their business

Feeling unsure about what legal documents you need to run your business? Learn more about you need to set yourself up for success.

Kaitlyn Eadie Jul. 14, 2022 9-minute read

Documents and contracts are the lifeblood of any business. They define interactions between businesses and their employees, other businesses, the public, and even itself. “When starting a business of your own, you will be entering into numerous contracts, probably every day, even if you’re not consciously aware, you’re entering into them,” says Marina Mavridis, Managing Director of directLEGAL.ca, which provides direct and affordable online legal services to Canadian businesses.

There is a common misconception that documentation and contracts, especially when made by lawyers, are long, complicated, and expensive to prepare. This is as false as the misconception that you can get by without them. As you’re getting things off the ground, these are the six most crucial documents that every business owner needs to run their business successfully.

Employment contracts

Every business should have employment contracts ready to go. Even sole proprietorships may occasionally hire independent contractors. This category includes employment contracts for full-time and part-time employees and interns and independent contractor agreements. When hiring employees of all types, you should use an Employment Agreement. When hiring an independent contractor, you should use a Services Agreement or Independent Contractor Agreement.

“It is critical to have a lawyer prepare these agreements to prevent future headaches, as failure to prepare proper employment contracts can have financial and legal repercussions for your business,” says Mavridis.

The Supreme Court of Canada has stated that Employment Standards laws are remedial legislation. In many cases, if an employee or independent contractor files a complaint against the business, the inspector assumes the business violated the law unless it can prove otherwise. Having proper employment contracts is one of the best ways to protect your new business.

Have a lawyer draft these agreements and review them periodically for changes to federal and provincial laws. It can save you future headaches and even save your company.

Why you need employment contracts:

Sets clear expectations for the employer and employee
Avoid and mitigate future disputes
Comply with employment legislation
Comply with payroll tax requirements

What to include:

Description of tasks and responsibilities
Payment amount
When and how payments are made
Time off entitlements
Reporting responsibilities, organizational structure
Length of employment relationship or contract service
Entitlements on termination

Confidentiality and non-disclosure agreements

A non-disclosure agreement (NDA) is a confidentiality agreement that protects information not available to the public. It’s usually included in employment contracts or added to them. It can also apply to visitors to your business, as an added level of protection.

“Having an NDA assists you in staying competitive by keeping your information secure,” says Mavridis. “Consider it like your banking password. You want it to be strong.”

An NDA defines what information within your company is considered confidential. It also states the expectations of each party to create and foster a confidential relationship. It describes how to handle information to prevent slip-ups and provides written proof of conversations.

Some of the things covered under an NDA include:

Trade secrets (formulas, recipes, processes)
Client and supplier information
Business information, operational procedures and strategies
Product and service information, such as procedures, packaging, equipment, tools and techniques
Test data and results
Transaction details and other financial information
Intellectual property (IP) and proprietary information, such as secret formulas, scientific information and prototypes
Manufacturing processes and production methods
Sales plans and marketing information

What to include:

Definitions of confidential information
Exclusions and limitations
Receiving party’s obligations
Parties involved
What the receiving party can and cannot do with the information
Time frame or term
Governing law

You must seek legal advice when crafting an NDA. Not doing so can lead to future problems, especially considering newly introduced legislation like Ontario’s proposed ban on non-compete clauses, which will make it easier for employees to move to competitors.

Intellectual property ownership and assignment agreements

These state who owns what at your company. You want to ensure you own the work your employees and contractors do for you. This includes technologies, processes, software, manuals, content and everything else. Before your employees or contractors do any work, you need a written IP ownership and assignment agreement, sometimes known as an assignment of copyright, so their work for you remains yours and in your control.

Protecting your business

Employment contracts are one of the first big steps to protecting your business, but many other critical documents are required to keep things moving in the direction you want with as little headache as possible. These include documents that help you protect your intellectual property.

Trademark

When you register your company or corporation, your company name has some built-in protections. No one else within the jurisdiction of registration or incorporation can have the exact same name, or a confusingly similar name.

A trademark offers even more legal protection for your brand. You can register a trademark for your company name, a word, a slogan or a logo, and it applies across the country. It works by registering the specific combination of images, words, and other identifiers that distinguishes your brand from all others. “Think of it as protecting your brand,” says Mavridis.

Trademarks are not the same as patents or copyright. Patents are more limited and protect a specific, quantifiable idea. Copyright is even more limited and only protects any original work.

A trademark is vital for any new business. Unscrupulous actors may attempt to profit from your hard work by confusing clients or customers, passing inferior versions of your product or services off as their own. It’s important to seek legal advice when setting up your trademark or trademarks, to make sure your business is adequately protected and that you’re not infringing on someone else’s intellectual property.

Once you establish a trademark you also need to uphold it by enforcing it. Keep an eye out for any trademark infringement. If you encounter trademark infringement, act immediately with the help of your legal team so you don’t weaken or possibly lose your trademark.

Interaction with the public

Specific documents are needed for any business that interacts with the public. Generally, these fall into two categories: policies and terms and conditions.

Think of policies as the internal laws of the business. Policies govern the internal running of the business, such as workplace health and safety policies and ethics policies. Policies also govern how the business interacts with the public. These can be as simple as the “No shirt, no shoes, no service” signs in the windows of brick-and-mortar businesses, or they can also be hundreds of pages long. Depending on the size of the business, the legal requirements for policies vary immensely and change often.

Terms and conditions are similar but different. They are the contracts between the business and the public for using its services, and they often overlap with policies. For example, “No shirt, no shoes, no service” is both a policy and the terms and conditions on which that business will engage with the public.

It’s important to have a lawyer review your existing policies periodically and discuss any new ones required by law.

As we live more of our lives online, businesses have increasingly shifted online as well. Many new businesses are now entirely web-based. This new era demands a new set of privacy policies and terms and conditions unique to website and app use.

Privacy policy

A privacy policy on your company website or app must be easily accessible. Along with the terms and conditions, the privacy policy should always be the first thing new users must review when signing up for your app. The privacy policy informs your users how you gather and store information and is legally binding.

When you create your privacy policy it’s vital to work with a lawyer. They’ll help ensure you meet all legal expectations under Canada’s Personal Information and Electronic Documents Act (PIPEDA) and the equivalent provincial legislation. Online payment systems also require a privacy policy, so it’s an important step in getting paid.

Your privacy policy needs to include the purpose of collecting any information, how it will be gathered, and how it will be used. Making sure that this is clear and easy to understand will build trust with your users. This area of law is complex due to many factors, including users’ age, jurisdictions, and human rights issues. Working with a lawyer who specializes in this area is essential to ensuring that any data you collect about your users and clients is compliant and protected.

Terms and conditions, or terms of service

The terms and conditions for the use of your website or app are essentially the contract between you and the user. They lay out the rules, guidelines, and conditions of using your website or app.

Terms and conditions require user consent, which you can acquire in two ways. You can state that by using the website, the user agrees to the terms and conditions. Or the user can check a box stating they have read and agree to the terms and conditions.

While not required by law and not always enforceable, terms and conditions help limit the legal liability for your business by:

Protecting your content or software
Informing users that you own the content you produce and the limits of the content’s use
Allowing control of your user base and the ability to terminate those misusing your website or application
Limiting liability if your website contains misinformation or errors
Providing notice of governing law

Why these documents are important

These 6 documents are the moving force behind your business. They help you to operate confidently, knowing that you’re as protected as possible.

However, it’s important to remember that just because these documents exist does not mean they’re enforceable. If your documents were drafted incorrectly, or if they aren’t up to date, they could be unenforceable or even illegal.

Treat these documents like insurance for your business. Just as you pay for property insurance to protect your place of business, proper legal documents can protect your business from expensive lawsuits and regulatory penalties.

ABOUT
Kaitlyn Eadie

Kaitlyn Eadie is a freelance writer and editor based out of the Greater Toronto Area. Her background is in plain language writing and editing for the medical, legal, financial and engineering fields. She has been published in academic, creative and technical works and, before becoming a freelancer, was the editor of two Canadian magazines.

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