Build Boundaries, Not Barriers: Why Contracts are a Startups BFF

Excitement centered around marketing, selling, and watching revenue pour in -- this is what most aspiring entrepreneurs think about when launching their business. Too often, though, new founders skip the foundational legal protections. And that early momentum of startup success could be undone by legal disputes, liabilities, or messy breakups with partners, clients, or team members.

That’s why Step 4 of the Build a Savvy Startup framework is about something less flashy—but practical and critical: protecting your business with contracts, agreements, and smart decisions before problems arise.

Let’s walk through a few key legal protections every startup should consider, how to think differently about risk, and how drafts can make this part of the process faster and more affordable than ever.

Quick disclaimer: The information provided in this article is for general informational purposes only and should not be considered legal advice. Reliance on this information is at your own risk.

See what I did there? Protecting my brand.

Contracts Aren’t Optional—They’re Your Business's Safety Net

Too many small business owners start operations with a handshake and good intentions. If I had a dollar for every person who told me they operate only with good-ol-boy handshakes, or didn’t want to go through the trouble of hiring an attorney to legalize agreements, I’d have a LOT of money. But even with the best of relationships, memory fades, expectations differ, and responsibilities shift. A well-written contract acts like a business prenup—it clarifies the terms before things go sideways and it sets clear expectations for all parties involved.

Here are the most common contracts you should talk to an attorney about as early as possible in your startup phase:

• Employee Agreements – outlines expectations, job responsibilities, compensation, confidentiality, and termination terms.
• Independent Contractor Agreements – These differ from employee contracts and should reflect IRS distinctions in control and scope.
• NDA (Non-Disclosure Agreements) – Vital when discussing sensitive or proprietary information with potential hires, partners, or vendors.
• Non-Compete & Non-Solicitation Agreements – Use with caution and within the legal limits of your state, especially to protect against losing clients or intellectual property to a departing team member.
• Customer Agreements – Spell out the terms of your service, payment terms, delivery timelines, and expectations for both parties.
• Vendor Contracts – Clarify what you're receiving, when, and at what cost—plus how issues will be handled.
• Rental and Lease Agreements – If you're leasing office space, equipment, or vehicles, don't rely on a generic document—review the fine print and liability clauses.

Long-Term vs Short-Term Agreements: A Strategic Approach

When structuring contracts, you’ll face an important choice: Do you go short-term and flexible, or long-term and committed?

Short-term agreements may make sense for trial periods or testing out a new service provider. They allow both parties to walk away with minimal disruption. However, short-term contracts may also be more costly.

Long-term agreements, meanwhile, are better suited when you want stability—say, locking in lower prices with a vendor or keeping a top contractor onboard through growth periods. While the cost may tend to be lower with these kinds of contracts, remember that you’re committing to a longer length of time. You should calculate whether you can afford to pay over such a lengthy period of time and include the cost in your budget or forecast.

Here’s a savvy strategy, Startup Founder, for you to consider: begin with a short-term agreement and include a clear pathway to renew, extend, or renegotiate based on performance. This hybrid approach allows flexibility while signaling that you’re building toward something sustainable. Managerial economics can also help you calculate what the best option would be. Ask any MBA-friend to help you uncover the answer!

Quick Action Tip: Draft Your First Contracts (Then Have a Pro Review Them)

Did you know you can draft a contract without having to shell out hundreds of dollars for billable attorney hours? Platforms like ChatGPT® or RocketLawyer can help you create contract drafts tailored to your business model.

Try this prompt in ChatGPT® to get started:

"Write a simple independent contractor agreement for a graphic designer who will provide branding and social media design services for my small business. The contract should include deliverables, payment terms, timelines, and IP ownership.”

Once you have a draft, review it with a local attorney who understands your state’s laws. AI and other templated sites help reduce time and cost and educates you on what the overall flow of the document could look like—but an attorney helps make sure the contract you set is aligned with what you want to achieve with all parties involved.

Did you notice how I italicized the word draft? That’s because I earnestly believe in the power of using a professional. And, each attorney is going to have their own opinion on how you should structure a contract or agreement. They likely will have their own copies of contract templates that you could use, too, assuming you retain them for their services. Nothing in life comes free, my friend, so you have to ask yourself:

How much money is worth a level of peace of mind?

Bonus tip: You can, and should, store templates and signed agreements inside your SOP library (we’ll get to that in Step 5!) and reuse them with new hires or vendors.

Savvy Mindset Shift: Think Like a Bigger Business Sooner

Most entrepreneurs delay contracts until they “have more money” or “are working with more people.” Does this sound like you? Trust me when I tell you that it sounds like me, too, from time to time. I have a few attorneys sitting on the backburner right now, waiting for my ‘green light’, and my service retainer fee, to get started but here I am, hesitating. Why? Because it costs money.

Nothing in life comes free, my friend.

Contracts don’t just protect your business—they demonstrate your business maturity. If you wait until you need them, it might already be too late and you could have exposed yourself to risk.

Here’s a way to shift your mindset if you are hesitating, too: Start acting like the kind of business you plan to become, not the one you are today. That includes putting protections in place. Good attorneys don’t want to take all your startup money, they’ll want to help guide you through the process. When you interview attorneys, wait for the one who tells you just that. And when the revenue does start pouring in that good attorney will be there to continue supporting you through your growth.

Even if you’re just working with one freelancer or one vendor, document the relationship. You'll build confidence and clarity, and if anything goes wrong, you’ll have the legal support to back you up.

Final Word: Protecting Your Business Is a Sign of Respect

Respect for yourself. Respect for your partners. And respect for the people who trust you with their money and ideas. Entrepreneurship requires boldness and risk—but it also requires wisdom and foresight. Contracts aren’t barriers; they’re boundaries that build trust and allow you to scale with confidence.

Don’t wait until things go wrong to start thinking about legal protection. Build these layers into your business now—because being savvy isn’t just about what you sell. It’s about how smart you are in the process of building it.

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About the Author

Caroline Y. Beasley is a Certified Public Accountant (CPA) licensed in California, Florida, and Virginia, with over 20 years of experience in business, accounting and tax. She also holds a Master of Business Administration (MBA) degree from the University of Florida. Caroline has a proven track record of helping organizations improve profitability, optimize operations, and achieve sustainable growth.

A former Big 4 and Big 8 public accountant, Caroline proactively helps small and mid-sized organizations and their high net worth owners navigate the business and tax landscape. She currently serves as the Chair for the Women’s Leadership Committee at the Florida Institute of CPAs and is the Local Chapter Lead in Hampton Roads, Virginia for the Military Spouse Chamber of Commerce.

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