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Allan is the cofounder of LessAccounting, loves his family more than breathing and builds weird lamps for fun.

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Common Contracts for a Service Business

Written by on Oct 31
service business contracts

This article is specially written for service based business which include design companies, web development, software companies, graphic design firms, marketing companies and photographers.

What Kinds Of Contracts Do I Need?

Service Contracts

You will probably use this contract the most. It reflects the services you will provide and the price at which you are providing those services. Make sure you clearly indicate your price and how the relationship can be terminated. You don’t want a situation where half way through the project, you are fired and you have already spent 20 hours on the project. To tackle this, you want to create a provision that says you will get paid pro-rata for the work already put in.

Indicate your project timeline, especially if the client is someone who constantly updates your project without offering any new price terms or timeline. You want to have enough control via your contract to prevent this.

Employment & Contractor Agreements

Service based businesses commonly use employee and contractor agreements, since their employees typically know details about your client’s unreleased products and upcoming marketing campaigns.

As an employer, you will look for confidentiality and how best to terminate an employee without serious ramifications. One of the most important clauses to consider is “confidentiality” or “nondisclosure.” If the confidential material is long, you can add it as an independent clause to the main employee agreement or use a separate agreement.

Oh, and then there are those damn interns. If you plan on hiring unpaid interns, there are a whole set of rules you need to follow in order to avoid any sort of future payments. The test to avoid payment is pretty simple–don’t make the intern do something a regular employee would otherwise do and essentially teach the intern something of value. More importantly, make it clear to the intern that he or she is not entitled to a job at the end of the internship, as well as to any wages during the period of the internship.

More intern legal information: Internship Programs Under The Fair Labor Standards Act

Finally, If you are the one hiring freelancers, remember that you need to give up most of your control such that the freelancer has very little instruction coming from you. Often, freelancers are mislabeled as independent contractors and the IRS knows this…The IRS will track your butt down, making you pay those taxes + penalties! The minute you start giving the freelancer specific instructions, you begin to switch over to “employee territory.” That opens the possibility of back wages and other benefits.

Read More: W2 vs 1099

In our next article, we’ll show you how to find and interview a small business attorney.

Side Note: Fill in the Blank Contracts vs. Freshly Drafted Contracts When choosing between fill in the blank contracts and attorney-drafted contracts, remember that a fill in the blank contract is fine but you have to be ready to adapt to change. Every situation is not the same and when the client or project is different, you want to make sure you reflect those differences in your contract. You can find standard, small business contracts here and here.

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