Unless you have a passion for legal documents, renewing contracts isn't typically a fun task. But it's one of the undeniable realities of entrepreneurship, and with the new year here, it's time to start thinking about contract renewal.
To help you prepare, we've rounded up some of the small business contracts that commonly need to be renewed at the beginning of each year or quarter.
If you run your business with one or more people other than yourself, then you'll need what's known as a business partnership agreement. Also known as an operating agreement, this type of contract outlines the details of the partnership.
If you don't renew your partnership agreement, then you won't have any legal document that defines:
How much each partner gets paid
What each partner is and isn't responsible for
The frequency at which the partners will meet
Which financial decisions can be made by which partners
The share of the company each partner owns
As a result, you won't have any formal guidance or legal protection if, for instance, one partner begins suddenly demanding a higher salary.
Independent Contractor Agreements
If you're like many other small businesses, then you don't do everything in-house. As one survey found, 80 percent of small businesses planned to outsource business functions in 2021. The areas they intended to outsource included IT services, accounting, legal tasks and more:
When you're using an independent contractor, you'll need a contractor agreement that defines the scope of the contractor's work, the amount they'll get paid, the duration of their contract and other parameters.
So if you plan on working with the same contractors again in 2022, then it's critical you renew your contracts with them to avoid any future confusion or conflict.
Just as independent contractor agreements define the business relationships between you and your contractors, employment agreements define the business relationships you share with your employees.
For instance, they can outline:
How much each employee will be paid
How often each employee will be paid
How much paid time off (PTO) each employee will receive
The terms of any future terminations
The amount each employee will be required to work
So if your employment agreements were set to expire at the end of 2021, then it's time to get ready to renew them.
Non-Disclosure Agreements (NDAs)
When you're brainstorming profitable business ideas or testing new products, the last thing you want is for those ideas or products to get leaked before you're prepared. This could result in your company's image being compromised or valuable ideas being used by competitors.
So, the solution is to use non-disclosure agreements, or NDAs for short. These define what everyone involved with your business — from contractors to employees to partners — is and is not allowed to share with third parties.
If you fail to renew those NDAs, you'll be opening the door for confidential information about your business to be legally released. As such, NDAs should be one of your top priorities during the contract renewal process.
Unless your business manufactures all its own supplies and tools (in which case, more power to you!), then you've probably already entered into sales agreements.
These spell out the terms and conditions of both one-time and ongoing sales. For instance, they can specify:
The quantity of items to be sold
The frequency at which your business will purchase those items
The price of each item
If you have any sales agreements that you want to extend into 2022, then you'd be wise to renew those contracts as soon as is appropriate.
Can a Company Legally Auto-Renew a Contract?
If you're tired of manual contract renewal, then you'll be glad to know that auto-renewal business contracts are most certainly an option. But in some states, there are laws dictating how the terms of those contracts must be disclosed and documented.
So before you enter into or renew any contracts with auto-renewal clauses, just be sure to brush up on your state's laws to ensure you're in the clear.
But whether your contracts are set to auto-renew or not, it's important that you prepare for the contract renewal process ahead of time to avoid any unwanted surprises.
There are certainly plenty of other business contracts than the ones we've covered here, so be sure to check out our Business Contract Library for help identifying all the ones that you need to renew for 2022.
Carrie Buchholz-Powers is a Colorado-based writer who’s been creating content since 2013. From digital marketing to ecommerce to land conservation, she has experience in a wide range of fields and loves learning about them all. Carrie is fond of history, animals and beauty in equal measure. In her free time, she enjoys knitting, playing video games and exploring Colorado's prairies and mountains with her husband.